The Monetary Transmission Mechanism in the Tropics: A Narrative Approach

By Andrew Berg, Luisa Charry, Rafael A Portillo, Jan Vlcek

September 20, 2013

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Andrew Berg, Luisa Charry, Rafael A Portillo, and Jan Vlcek. The Monetary Transmission Mechanism in the Tropics: A Narrative Approach, (USA: International Monetary Fund, 2013) 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

Many central banks in low-income countries in Sub-Saharan Africa are modernising their monetary policy frameworks. Standard statistical procedures have had limited success in identifying the channels of monetary transmission in such countries. Here we take a narrative approach, following Romer and Romer (1989), and center on a significant tightening of monetary policy that took place in 2011 in four members of the East African Community: Kenya, Uganda, Tanzania and Rwanda. We find clear evidence of the transmission mechanism in most of the countries, and argue that deviations can be explained by differences in the policy regime in place.

Subject: Banking, Central bank policy rate, Exchange rate arrangements, Exchange rates, Financial services, Foreign exchange, Inflation, Prices, Short term interest rates

Keywords: Central bank, Central bank policy rate, Core inflation, Economic structure, Excess reserves, Exchange rate, Exchange rate arrangements, Exchange rate channel, Exchange rate pressure, Exchange rates, Global, Headline inflation, Inflation, Interest rate channel, Interest rate transmission mechanism, Kenya, Low Income Countries, Monetary policy response, Monetary Transmission Mechanisms, Nominal exchange rate, Policy regime, Rate, Short term interest rates, Uganda, WP

Publication Details

Pages:

54
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/197
Stock No:

WPIEA2013197
ISBN:

9781484398135
ISSN:

1018-5941

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