The dynamic effects of monetary policy innovations in Ethiopia
African Journal of Economic and Management Studies
ISSN: 2040-0705
Article publication date: 24 December 2020
Issue publication date: 9 March 2020
Abstract
Purpose
The purpose of this paper is to investigate the effects of unanticipated monetary policy innovations on output and price for Ethiopia from 1991:Q1 to 2016:Q1.
Design/methodology/approach
Short run and long run identification schemes on structural vector autoregressive model are employed in this study.
Findings
The impulse response function results generated show that while a positive shock in interest rate causes a reduction in output and price puzzle, a positive shock to broad money supply has a positive and significant effect on output and price. A positive shock in real effective exchange rate has also an expansionary, though insignificant, effect on impact on both output and price. These results are especially true for the short run identification scheme. As to the results from the variance decomposition, the study shows that the highest variation in output and price is caused by broad money supply shock in the short run.
Originality/value
It adds to the scarce empirical literature on the effects of monetary policy innovations on the Ethiopian economy.
Keywords
Acknowledgements
Corrigendum: It has come to the attention of the publisher that the article Naser Yenus Nuru, (2019) “The dynamic effects of monetary policy innovations in Ethiopia”, published in African Journal of Economic and Management Studies, Volume 11, Issue 1, did not include co-author, Habtamu Kefelegn in their original submission, The author sincerely apologise for this.
Citation
Nuru, N.Y. and Kefelegn, H. (2020), "The dynamic effects of monetary policy innovations in Ethiopia", African Journal of Economic and Management Studies, Vol. 11 No. 1, pp. 169-180. https://doi.org/10.1108/AJEMS-08-2019-0307
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited