A Dynamic Model of Inflation for Kenya, 1974–1996

Author/Editor:

Njuguna S. Ndung'u ; Dick Durevall

Publication Date:

July 1, 1999

Electronic Access:

Free Full Text (PDF file size is 1537 KB).Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper analyses the dynamics of inflation in Kenya during 1974–96, a period characterized by external shocks and internal disequilibria. By developing a parsimonious and empirically constant error correction model the paper finds that the exchange rate, foreign prices, and terms of trade have long-run effects on inflation, while the money supply and interest rate only have short-run effects. The dynamics of inflation are also found to be influenced by food supply constraints. Moreover, inertia is important for the period up to 1993, when about 40 percent of current inflation was transmitted to the next quarter. After 1993 inertia drops to about 10 percent.

Series:

Working Paper No. 99/97

Subject:

English

Publication Date:

July 1, 1999

ISBN/ISSN:

9781451852004/1018-5941

Stock No:

WPIEA0971999

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

36

Please address any questions about this title to publications@imf.org