A Dynamic Model of Inflation for Kenya, 1974–1996

Author: Njuguna S. Ndung'u and Mr. Dick Durevall

Volume/Issue: Volume 1999 Issue 097

Publication date: July 1999

ISBN: 9781451852004

$20.00

Add to Cart by clicking price of the language and format you'd like to purchase

Available Languages and Formats


English

Prices in red indicate formats that are not yet available but are forthcoming.

Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Exports and Imports , Inflation , Money and Monetary Policy , WP , exchange rate , maize-price inflation , Kenya , Inflation , Inertia , Money demand , Food supply , Real exchange rate , Terms of Trade , Cointegration , Error Correction Model , inflation inertia , inflation expectation , drives inflation , rate of inflation , Exchange rates , Real exchange rates , Monetary base

Also of interest

Demand for Ethanol Considering Spatially Differentiated Fuel Retailers

Measuring Soft Power: A New Global Index

Public Investment Management Bottlenecks in Low-income Countries

Private Participation and its Discontents: Insights from Large-Scale Surveys

Summary

This paper analyses the dynamics of inflation in Kenya during 1974–96, a period characterized by external shocks and internal disequilibria. By developing a parsimonious and empirically constant error correction model the paper finds that the exchange rate, foreign prices, and terms of trade have long-run effects on inflation, while the money supply and interest rate only have short-run effects. The dynamics of inflation are also found to be influenced by food supply constraints. Moreover, inertia is important for the period up to 1993, when about 40 percent of current inflation was transmitted to the next quarter. After 1993 inertia drops to about 10 percent.