UID:
edoccha_9958065767302883
Format:
1 online resource (45 p.)
ISBN:
1-4755-3836-7
,
1-4755-1668-1
,
1-4755-1718-1
Series Statement:
IMF Working Papers
Content:
We extend the framework in Andrle and others (2013) to incorporate an explicit role for money targets and target misses in the analysis of monetary policy in low-income countries (LICs), with an application to Kenya. We provide a general specification that can nest various types of money targeting (ranging from targets based on optimal money demand forecasts to those derived from simple money growth rules), interest-rate based frameworks, and intermediate cases. Our framework acknowledges that ex-post adherence to targets is in itself an objective of policy in LICs; here we provide a novel interpretation of target misses in terms of structural shocks (aggregate demand, policy, shocks to money demand, etc). In the case of Kenya, we find that: (i) the setting of money targets is consistent with money demand forecasting, (ii) targets have not played a systematic role in monetary policy, and (iii) target misses mainly reflect shocks to money demand. Simulations of the model under alternative policy specifications show that the stronger the ex-post target adherence, the greater the macroeconomic volatility. Our findings highlight the benefits of a model-based approach to monetary policy analysis in LICs, including in countries with money-targeting frameworks.
Note:
Description based upon print version of record.
,
Cover; Contents; I: Introduction; II: Monetary Policy Targets and Instrument Choice; III: Introducing Money Targeting in a New-Keynesian Model for Kenya; A: Money Demand; B: Monetary Policy; 1 Interest Rate Rule; 2 Money Growth Target; 3 Intermediate cases; C: Key Features and Properties of the Model; IV: Empirical Application - The Kenyan Economy; A: The Monetary Policy Regime in Kenya - A Brief Review; Figures; 1 Foreign demand shock; 2 Money Market Rates and Central Bank Rate (CBR); 3 Overnight Interbank Rate and Taylor-Rule-Implied Rate; B: Money Demand in Kenya
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4 Real Money and Output GrowthC: Money Targets; 5 Money Multipliers and Velocity; D: Do Money Targets Matter for Monetary Policy in Kenya?; 6 Money Growth: Filtered vs. Predicted.; 7 Actual Reserve Money and Reserve Money Targets; E: A macroeconomic decomposition of money targets and monetary policy in Kenya; 8 Policy Stance and Target Misses; 9 Reserve Money Deviations from Target; F: Model-Based Real-Time Analysis and Money as an Indicator Variable; 10 Reserve Money Target Misses, Shock Decomposition; V: Conclusions; 11 Nowcasting with the Model; Tables; 1 Standard Deviations
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2 Standard DeviationsI: A Bestiary of Money Growth Rules; II: Calibration of the Model; 3 Calibration of the Money Block Parameters; 4 Calibration of Standard Deviations (STD) of Shocks; III: Data; IV: Impulse Response Functions; 5 Reserve Money Data; 12 Domestic demand shock; 13 Money demand (liquidity) shock
,
English
Additional Edition:
ISBN 1-4755-3800-6
Additional Edition:
ISBN 1-306-27052-9
Language:
English
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