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A VAR Analysis of Kenya’s Monetary Policy Transmission Mechanism How Does the Central Bank’s REPO Rate Affect the Economy?

This paper examines the impact of a monetary policy shock on output, prices, and the nominal effective exchange rate for Kenya using data during 1997–2005. Based on techniques commonly used in the vector autoregression literature, the main results suggest that an exogenous increase in the short-term...

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Bibliographic Details
Main Author: Cheng, Kevin
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2006
Series:IMF Working Papers
Subjects:
Interest Rates
Finance
Dynamic Treatment Effect Models
Monetary Economics
Short Term Interest Rates
Monetary Policy, Central Banking, And The Supply Of Money And Credit: General
Currency
Diffusion Processes
Nominal Effective Exchange Rate
Vector Autoregression
Time-series Models
Money Supply
Foreign Exchange
Monetary Base
Banks And Banking
Monetary Policy
Interest Rates: Determination, Term Structure, And Effects
Dynamic Quantile Regressions
Econometrics
Econometrics & Economic Statistics
Money And Monetary Policy
Monetary Transmission Mechanism
Kenya
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:This paper examines the impact of a monetary policy shock on output, prices, and the nominal effective exchange rate for Kenya using data during 1997–2005. Based on techniques commonly used in the vector autoregression literature, the main results suggest that an exogenous increase in the short-term interest rate tends to be followed by a decline in prices and appreciation in the nominal exchange rate, but has insignificant impact on output. Moreover, the paper finds that variations in the short-term interest rate account for significant fluctuations in the nominal exchange rate and prices, while accounting little for output fluctuations
Physical Description:26 pages
ISBN:9781451865608

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