Money Targeting in a Modern Forecasting and Policy Analysis System: an Application to Kenya
An analysis of monetary policy in low-income countries, with an application to Kenya
Abstract
The authors 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. They 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. Their framework acknowledges that ex-post adherence to targets is in itself an objective of policy in LICs; here they provide a novel interpretation of target misses in terms of structural shocks (aggregate demand, policy, shocks to money demand, etc).
This work is part of the ‘Macroeconomics in Low-income countries’ programme.
Citation
Michal Andrle, Andrew Berg, Enrico G Berkes, Rafael A Portillo, Jan Vlcek, R. Armando Morales (2013) Money Targeting in a Modern Forecasting and Policy Analysis System : an Application to Kenya. IMF working paper WP/13/239
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Money Targeting in a Modern Forecasting and Policy Analysis System : an Application to Kenya