{
  "title": "The Monetary Transmission Mechanism in the Tropics: A Narrative Approach",
  "publication": "IMF Working Papers, September 20, 2013",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/the-monetary-transmission-mechanism-in-the-tropics-a-narrative-approach-40955",
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  "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.",
  "sections": [
    {
      "heading": "Summary and main findings",
      "content": "- Many central banks in low-income countries in Sub-Saharan Africa are modernising their monetary policy frameworks.\n- Standard statistical procedures have had limited success in identifying the channels of monetary transmission in such countries.\n- The paper adopts a narrative approach following Romer and Romer (1989), centering 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.\n- The authors find clear evidence of the transmission mechanism in most of the countries examined.\n- Deviations from expected transmission are argued to be explainable by differences in the policy regime in place."
    },
    {
      "heading": "Methodology",
      "content": "- Narrative approach inspired by Romer and Romer (1989) to identify a significant monetary policy tightening episode in 2011 across Kenya, Uganda, Tanzania and Rwanda.\n- Focus on tracing channels of monetary transmission where standard statistical procedures were judged to have limited success."
    },
    {
      "heading": "Key themes, channels, and variables analyzed",
      "content": "- Banking\n- Central bank policy rate\n- Exchange rate arrangements\n- Exchange rates (including nominal exchange rate and exchange rate pressure)\n- Financial services and foreign exchange\n- Inflation: headline inflation and core inflation\n- Prices\n- Short term interest rates\n- Interest rate channel and interest rate transmission mechanism\n- Monetary policy response and policy regime\n- Economic structure and excess reserves"
    },
    {
      "heading": "Policy implications and interpretation",
      "content": "- Modernisation of monetary policy frameworks in low-income Sub-Saharan African central banks can enhance identification of transmission channels.\n- Narrative identification of policy shocks can reveal transmission where standard statistical methods fall short.\n- Heterogeneous policy regimes across countries can account for deviations in the observed transmission of monetary policy.\n\n---\n\n Content in this bundle\n\n- Box 1. EAC4 – Exchange Rate Arrangements and the Capital Account\n  - Box 1. EAC4 – Exchange Rate Arrangements and the Capital Account (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Box 1. EAC4 – Exchange Rate Arrangements and the Capital Account (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-monetary-transmission-mechanism-in-the-tropics-a-narrative-approach-40955"
    }
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    "Authors: Andrew Berg, Luisa Charry, Rafael A Portillo, Jan Vlcek",
    "Published: September 20, 2013",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484398135.001",
    "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.",
    "The paper adopts a narrative approach following Romer and Romer (1989), centering 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.",
    "The authors find clear evidence of the transmission mechanism in most of the countries examined.",
    "Deviations from expected transmission are argued to be explainable by differences in the policy regime in place.",
    "Narrative approach inspired by Romer and Romer (1989) to identify a significant monetary policy tightening episode in 2011 across Kenya, Uganda, Tanzania and Rwanda.",
    "Focus on tracing channels of monetary transmission where standard statistical procedures were judged to have limited success.",
    "Banking",
    "Central bank policy rate",
    "Exchange rate arrangements",
    "Exchange rates (including nominal exchange rate and exchange rate pressure)",
    "Financial services and foreign exchange",
    "Inflation: headline inflation and core inflation",
    "Prices",
    "Short term interest rates",
    "Interest rate channel and interest rate transmission mechanism",
    "Monetary policy response and policy regime",
    "Economic structure and excess reserves",
    "Modernisation of monetary policy frameworks in low-income Sub-Saharan African central banks can enhance identification of transmission channels.",
    "Narrative identification of policy shocks can reveal transmission where standard statistical methods fall short.",
    "Heterogeneous policy regimes across countries can account for deviations in the observed transmission of monetary policy.",
    "**Box 1. EAC4 – Exchange Rate Arrangements and the Capital Account**"
  ],
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