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Empirical analysis of monetary policy reaction function in an emerging African market economy

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  • Maureen Were

Abstract

The paper analyses monetary policy reaction function for Kenya using quarterly data for the period 1999 to 2011. The empirical results show a strong effect of interest rate smoothing and support the fact that monetary policy was accommodative of the output growth objective. The response to inflation is however, generally found to be low, perhaps signifying the importance of supply-side inflation. Nonetheless, there is evidence in support of forward-looking monetary policy, which is critical in view of the increasing role of expectations in modern monetary policy-making process.

Suggested Citation

  • Maureen Were, 2014. "Empirical analysis of monetary policy reaction function in an emerging African market economy," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 8(3), pages 340-353.
    • Handle: RePEc:ids:ijecbr:v:8:y:2014:i:3:p:340-353
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    Cited by:

    1. Peter Wamalwa, 2018. "Optimal Monetary Policy with Output and Asset Price Volatility in an Open Economy: Evidence from Kenya," Working Papers 734, Economic Research Southern Africa.
    2. Felix S. Nyumuah, 2018. "An Empirical Analysis of the Monetary Policy Reaction Function," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(3), pages 30-35, March.

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