Introducing a Semi-Structural Macroeconomic Model for Rwanda

Author/Editor:

Luisa Charry ; Pranav Gupta ; Vimal V Thakoor

Publication Date:

August 22, 2014

Electronic Access:

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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.

Series:

Working Paper No. 2014/159

Subject:

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

English

Publication Date:

August 22, 2014

ISBN/ISSN:

9781498398343/1018-5941

Stock No:

WPIEA2014159

Pages:

37

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