Introducing a Semi-Structural Macroeconomic Model for Rwanda

By Luisa Charry, Pranav Gupta, Vimal V Thakoor

August 22, 2014

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Luisa Charry, Pranav Gupta, and Vimal V Thakoor. Introducing a Semi-Structural Macroeconomic Model for Rwanda, (USA: International Monetary Fund, 2014) accessed September 19, 2024

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

We develop a simple semistructural model for the Rwandan economy to better understand the monetary policy transmission mechanism. A key feature of the model is the introduction of a modified uncovered interest parity condition to capture key structural features of Rwanda’s economy and policy framework, such as the limited degree of capital mobility. A filtration of the observed data through the model allows us to illustrate the contribution of various factors to inflation dynamics and its deviations from the inflation target. Our results, consistent with evidence for other countries in the region, suggest that food and oil prices as well as the exchange rate have accounted for the bulk of inflation dynamics in Rwanda.

Subject: Exchange rates, Financial services, Foreign exchange, Inflation, Output gap, Prices, Production, Real exchange rates, Real interest rates

Keywords: Exchange rate, Exchange rates, Food inflation, Global, Inflation, Inflation dynamics, Inflation expectation, Inflation target, Low Income Countries, Monetary policy, Monetary policy stance, Monetary Transmission Mechanisms, Output gap, Real exchange rates, Real interest rates, Transmission mechanism, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/159
Stock No:

WPIEA2014159
ISBN:

9781498398343
ISSN:

1018-5941

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