## Building Monetary Transmission in Ethiopia

_Selected Issues Papers, July 30, 2025_

## Source details

**Canonical URL:** [Building Monetary Transmission in Ethiopia](https://www.imf.org/en/publications/selected-issues-papers/issues/2025/07/30/building-monetary-transmission-in-ethiopia-569124)

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## Bibliographic details
- Authors: Deirdre Daly, Bryan Gurhy
- Published: July 30, 2025
- Series: Selected Issues Papers
- DOI: https://doi.org/10.5089/9798229018777.018

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### Summary
- This Selected Issues Paper reviews Ethiopia’s transition to an interest-rate based monetary framework.
- Monetary transmission is defined as "the process through which policy rate changes affect inflation and economic activity."
- For the interest-rate based framework to be effective, monetary transmission must function reliably.
- Achieving reliable transmission requires:
  - a clear, well-communicated policy framework,
  - strong analytical capacity,
  - continued efforts to address structural features that may hamper transmission.

### Key findings and themes
- The paper focuses on Ethiopia’s transition from previous frameworks toward an interest-rate based monetary policy.
- Emphasis is placed on the institutional and structural prerequisites for effective monetary policy transmission, including communication and analytical capacity.
- Structural features that may hamper transmission are identified as ongoing concerns that require continued effort.

### Policy recommendations and implications
- Strengthen clarity and communication of the policy framework to enhance the credibility and signaling role of the policy rate.
- Build and maintain strong analytical capacity within the central bank to support policy formulation and evaluation.
- Continue addressing structural impediments to ensure policy rate changes transmit effectively to inflation and economic activity.

### Publication and metadata
- Authors: Deirdre Daly, Bryan Gurhy
- Publication date: July 30, 2025
- Format: Selected Issues Paper
- Pages: 18
- Volume: 2025
- Issue: 106
- Series: Selected Issues Paper No. 2025/106
- DOI: https://doi.org/10.5089/9798229018777.018
- Stock No: SIPEA2025106
- ISBN: 9798229018777
- ISSN: 2958-7875
- Subjects: Central bank policy rate, Exchange rates, Financial services, Foreign exchange, Inflation, Interbank rates, Monetary policy, Monetary policy frameworks, Prices
- Keywords: building monetary policy transmission; Central bank policy rate; Exchange rates; Inflation; Interbank rates; interest-rate based monetary policy; monetary policy effectiveness; monetary policy frameworks; Monetary policy transmission; MPC meeting statement; paper reviews Ethiopia's transition; rate change; Sub-Saharan Africa

*International Monetary Fund*

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- **Sipea2025106**
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_Source: https://www.imf.org/en/publications/selected-issues-papers/issues/2025/07/30/building-monetary-transmission-in-ethiopia-569124_