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Monetary Policy in Sub-Saharan Africa$
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Andrew Berg and Rafael Portillo

Print publication date: 2018

Print ISBN-13: 9780198785811

Published to Oxford Scholarship Online: April 2018

DOI: 10.1093/oso/9780198785811.001.0001

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The Monetary Transmission Mechanism

The Monetary Transmission Mechanism

Lessons from a Dramatic Event

(p.89) Chapter 5 The Monetary Transmission Mechanism
Monetary Policy in Sub-Saharan Africa

Andrew Berg

Jan Vlcek

Luisa Charry

Rafael A. Portillo

Oxford University Press

Many central banks in low-income countries in sub-Saharan Africa are modernizing their monetary policy frameworks. Standard statistical procedures have had limited success in identifying the channels of monetary policy transmission in such countries. This chapter takes a case study approach and examines 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 evidence of the transmission mechanism in most of the countries. After a large policy-induced rise in the short-term interest rate in Kenya and Uganda, lending rates rose, the exchange rate appreciated, output growth tended to fall, and inflation declined. The other two countries present somewhat different pictures. Variations across countries can be explained mainly by differences in the policy regime.

Keywords:   Monetary transmission mechanism, developing countries, low-income countries, monetary policy, inflation, Uganda, Kenya, Tanzania, Rwanda

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