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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:The Exchange Rate and Monetary Policy in Kenya
Author:Ndung'u, Njuguna S.ISNI
Year:2000
Periodical:African Development Review
Volume:12
Issue:1
Period:June
Pages:24-51
Language:English
Geographic term:Kenya
Subjects:monetary policy
exchange rates
Economics and Trade
External link:https://onlinelibrary.wiley.com/doi/10.1111/1467-8268.00014/pdf
Abstract:This article assesses whether the exchange rate is affected by monetary policy and whether these effects are permanent or transitory in the case of Kenya for the period 1970-1995. It assumes that macroeconomic policies are adjusted to fit a chosen exchange rate policy and that once the exchange rate regime has been chosen, it determines the flexibility or independence of monetary policy. The results of the analysis tend to confirm the hypothesis that monetary shocks affect the real exchange rate, and show that there are feedback effects between monetary shocks and the cyclical movements of the real exchange rate and that this cyclical component appreciates the nominal exchange rate. In addition, money supply growth depreciates the nominal exchange rate. The results from causality tests between the official exchange rate and the parallel rate show that even though the parallel market was illegal, the Central Bank in determining the crawl (during the crawling rate regime) took into account the value of the currency in the parallel market, but did not hook the crawl entirely on the parallel market developments. This shows an element of backward indexation. App., bibliogr., notes, ref., sum. in English and French.
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