Assessing the effectiveness of monetary policy in Kenya: Evidence from a macroeconomic model

Trade-Off Phillips Curve, Inflation and Economic Implication: The Kenyan Case

“…Similarly, despite the high economic growth since past decades, Kenya has, however, experienced relatively high inflation with negative macroeconomic impacts (Casares, Moreno, & Vázquez, 2014;Durevall & Sjö, 2012;Misati & Munene, 2015;Nyongesa, Lubega Amlega, & Odhiambo, 2017;Roseline Nyakerario Misati, 2012). Hanif, 2004;Were, Nyamongo, Kamau, Sichei, & Wambua, 2014). On the other hand, workers who have already revised their wage rates upwards to suffice the eroding inflation effects depresses the expenditure phobic employers who freeze employment.…”

“…So far, the country has been yearning for low inflation and economic development through inflation targeting and sustainable economic growth policies. The central bank and other fiscal policy strategists are part of the syndicate largely been embracing such policies (Gil-Alana & Mudida, 2017;Were et al, 2014) to anchor low inflation dynamics as macro-economic planners advocates for fostering economic diversification, development of resilient regional integration as avenues to boost export. The country is one of the few in sub-Saharan Africa that have significantly embraced macro-economic model tools and policies since the new millennium to plan fiscal activities (Were et al, 2014).…”

“…The central bank and other fiscal policy strategists are part of the syndicate largely been embracing such policies (Gil-Alana & Mudida, 2017;Were et al, 2014) to anchor low inflation dynamics as macro-economic planners advocates for fostering economic diversification, development of resilient regional integration as avenues to boost export. The country is one of the few in sub-Saharan Africa that have significantly embraced macro-economic model tools and policies since the new millennium to plan fiscal activities (Were et al, 2014). To name a few, the KIPPRA-Treasury Macroeconomic model (Note 2) developed in 2000 in a Kenyan policy research institute affiliated with the treasury was key to fiscal policy planning mainly through prediction of macro-economic variables (Huizinga, Geda, Ndun'gu, & Karingi, 2001;Were et al, 2014).…”

“…The country is one of the few in sub-Saharan Africa that have significantly embraced macro-economic model tools and policies since the new millennium to plan fiscal activities (Were et al, 2014). To name a few, the KIPPRA-Treasury Macroeconomic model (Note 2) developed in 2000 in a Kenyan policy research institute affiliated with the treasury was key to fiscal policy planning mainly through prediction of macro-economic variables (Huizinga, Geda, Ndun'gu, & Karingi, 2001;Were et al, 2014). In 2011 a more superior than the KIPPRA tool was developed; the central bank of Kenya (CBK) model (Note 3) whose objectives since then have been to model fiscal policies and quarterly macro-economic planning.…”

“…In 2011 a more superior than the KIPPRA tool was developed; the central bank of Kenya (CBK) model (Note 3) whose objectives since then have been to model fiscal policies and quarterly macro-economic planning. In addition to fiscal policy strategies, are the current monetary policy tools in place; the central bank rate (CBR) and the cash reserve ratio (CRR) tools among others utilized to date to control interest rates and anchorage of inflation by the central bank of Kenya (Were et al, 2014). Their sustainable implementation by monetary authorities is believed to have had a desirable impact in monitoring the inflation and lowly containing the impact of domestic shocks.…”