## Taylor Visits Africa

_IMF Working Papers, December 9, 2015_

## Source details

**Canonical URL:** [Taylor Visits Africa](https://www.imf.org/en/publications/wp/issues/2016/12/31/taylor-visits-africa-43447)

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- [Markdown version](/en/publications/wp/issues/2016/12/31/taylor-visits-africa-43447/index.md)
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## Bibliographic details
- Authors: Carlos Goncalves
- Published: December 9, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513560540.001

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### Summary and main findings
- Many low-income countries do not use interest rates as their main monetary policy instrument.
- In East Africa, targeting money aggregates "has been pretty much the rule rather than the exception."
- Money aggregate targets are seldom met and often readjusted according to the economic environment, opening the possibility that central banks are de facto pursuing a strategy more akin to a Taylor Rule.
- Estimations of small-scale models for Kenya, Uganda and Tanzania suggest:
  - These self-styled "monetary targeters" are respecting the Taylor Principle, that is are on average increasing nominal interest rates more than proportionally to inflation.
  - Steep deviations from the Taylor Rule have taken place in Kenya and Tanzania.
  - In Uganda, these errors are much smaller, in fact similar in size to Taylor Rule deviations found for Brazil.
  - Uganda’s deviations are smaller than South Africa’s, the continent’s sole long-term inflation targeter.

### Methodology and scope
- Analysis based on estimations of small-scale models for Kenya, Uganda and Tanzania.
- Focus on de facto policy behavior where explicit monetary targeting exists but targets are frequently missed or adjusted.

### Policy-relevant observations
- Adjustments and frequent misses of money-aggregate targets imply that central banks that nominally target aggregates may effectively follow interest-rate based rules.
- Respecting the Taylor Principle indicates nominal interest rates are increased more than proportionally to inflation on average in the sampled East African countries.
- Large deviations in some countries (Kenya and Tanzania) point to episodes of significant departure from rule-like behavior; smaller deviations in Uganda suggest relative policy consistency comparable to Brazil and better than South Africa in the sample.

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## Content in this bundle

- **Taylor Visits Africa; by Carlos Eduardo Goncalves; IMF Working Paper WP/15/258; December 2015**
  - [Taylor Visits Africa; by Carlos Eduardo Goncalves; IMF Working Paper WP/15/258; December 2015 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2015/_wp15258.pdf.md){rel="alternate" type="text/markdown"}
  - [Taylor Visits Africa; by Carlos Eduardo Goncalves; IMF Working Paper WP/15/258; December 2015 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2015/_wp15258.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/taylor-visits-africa-43447_