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Article
Publication date: 4 July 2011

Roseline N. Misati, Esman M. Nyamongo and Anne W. Kamau

This study aims to quantitatively measure the size and speed of monetary policy interest rate transmission to long‐term interest rates in Kenya.

Abstract

Purpose

This study aims to quantitatively measure the size and speed of monetary policy interest rate transmission to long‐term interest rates in Kenya.

Design/methodology/approach

The study uses autoregressive distributed lag specification re‐parameterized as an error correction model and mean adjustment lag methods.

Findings

The study finds incomplete pass‐through of policy rates both in the short and the long run. The study also shows that it takes approximately between 11 months to two years for policy interest rate to be fully transmitted to long‐term rates.

Originality/value

The study is novel as it is the first attempt the authors are aware of that empirically investigates the interest rate pass‐through in Kenya using high‐frequency data. Measuring the speed and size of interest rate pass‐through provides policy makers with insights on how long it takes for a particular policy action to yield desired results on the real economy. The findings of this study will therefore inform policy makers of the effectiveness of their policy decisions and facilitate timely monetary policy actions.

Details

International Journal of Development Issues, vol. 10 no. 2
Type: Research Article
ISSN: 1446-8956

Keywords

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Article
Publication date: 1 February 2010

Morekwa Esman Nyamongo and Roseline Misati

The paper seeks to investigate the relationship between stock volatility and returns in the Nairobi Stock Exchange, Kenya. It uses daily returns data over the period…

Abstract

Purpose

The paper seeks to investigate the relationship between stock volatility and returns in the Nairobi Stock Exchange, Kenya. It uses daily returns data over the period January 2006 to April 2009.

Design/methodology/approach

Empirical analysis is based on quantitative analysis with emphasis on descriptive statistics, and advanced econometrics models which are well suited to capture the time‐varying volatility. The models utilised in this study fall into the family of generalised autoregressive conditional heteroscedasticity models.

Findings

The main findings of the paper are as follows: the equities returns are symmetric but leptokurtic and thus not normally distributed; volatility of returns is highly persistent; the leverage effects are not significant; and the impact of news on volatility is not significantly asymmetric.

Practical implications

The findings of this paper will aid policy makers, policy analysts, investors, and academics to gain in‐depth understanding of dynamics of the equities returns in Kenya particularly, with regard to leverage and impact of news.

Originality/value

The paper was conducted at a time when the volatility of the equity market returns in the global stock markets in general and Kenya in particular was high on account of the global financial crisis and the aftermath of the post‐election violence in Kenya. Given that excess volatility in the stock market undermines the reliability of stock market prices as a signal to the true value of the firm, the findings of this paper will provide useful insights in the assessment of portfolio allocation and investment decisions in Kenya.

Details

African Journal of Economic and Management Studies, vol. 1 no. 2
Type: Research Article
ISSN: 2040-0705

Keywords

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Article
Publication date: 7 June 2013

Esman Morekwa Nyamongo and Kebede Temesgen

The purpose of this paper is to investigate the effect of corporate governance on the performance of 37 commercial banks in Kenya over the period 2005‐2009.

Abstract

Purpose

The purpose of this paper is to investigate the effect of corporate governance on the performance of 37 commercial banks in Kenya over the period 2005‐2009.

Design/methodology/approach

The paper uses two measures of performance, i.e. return on assets (ROA) and return on equity (ROE), and the dependent variables and three measures of governance – namely the board size, independent directors, and CEO duality – as the key independent variables. The study follows a panel econometrics technique to investigate the relationship between governance variables and bank performance.

Findings

The main findings are as follows: a large board size tends to impact performance negatively; the existence of independent board directors tends to enhance the performance of the banks; and there is no evidence that CEO duality or otherwise has impact on the performance of commercial banks in Kenya.

Practical implications

The study therefore recommends that for commercial banks in Kenya to register high performance they need to check the size of their board of directors and also increase the number of independent directors.

Originality/value

To the authors' best knowledge, this is the first study on Kenya that has used advanced panel data techniques.

Details

Corporate Governance: The international journal of business in society, vol. 13 no. 3
Type: Research Article
ISSN: 1472-0701

Keywords

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Article
Publication date: 25 May 2012

Roseline Nyakerario Misati, Esman Morekwa Nyamongo, Lucas Kamau Njoroge and Sheila Kaminchia

The purpose of this paper is to assess the suitability of adopting inflation targeting in an emerging market, based on the pre‐conditions of inflation targeting identified…

Abstract

Purpose

The purpose of this paper is to assess the suitability of adopting inflation targeting in an emerging market, based on the pre‐conditions of inflation targeting identified in the literature.

Design/methodology/approach

The study uses Granger causality and VAR approaches to assess the importance of the relationship between monetary policy variables and inflation.

Findings

The findings indicate a dominant role of fiscal policy on both prices and output. The results therefore support the fiscal theory of price level, implying a need for incorporation of a fiscal variable in the design of monetary policy. The study also observes that the employment contract of the office of the governor is relatively short‐term and less than the Kenyan election cycle. The exchange rate is found to have no role on both prices and output. More importantly, the results show that the Kenyan economy does not meet all the conditions necessary for adopting inflation targeting.

Originality/value

The study described in the paper is novel, as it is the first attempt the authors are aware of that empirically assesses the feasibility of inflation targeting in Kenya. The paper provides policy makers in emerging markets with useful information on the choice of appropriate policy frameworks for maintaining price stability. It also demonstrates the need for evaluation of any policy framework before adoption.

Details

Journal of Financial Economic Policy, vol. 4 no. 2
Type: Research Article
ISSN: 1757-6385

Keywords

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Article
Publication date: 31 August 2012

Roseline Nyakerario Misati and Esman Morekwa Nyamongo

The purpose of this paper is to investigate the effectiveness of asset price channel in monetary policy transmission and the effect of stock market volatility on monetary…

Abstract

Purpose

The purpose of this paper is to investigate the effectiveness of asset price channel in monetary policy transmission and the effect of stock market volatility on monetary policy in Kenya.

Design/methodology/approach

Empirical analysis is based on quantitative analysis which incorporates both descriptive analysis and empirical approach. The study specifically uses the VAR approach which is most appropriate for this kind of study involving analysis of policy shocks on macroeconomic variables.

Findings

The main findings of this paper are as follows: first, the evidence of the existence of the asset price channel of monetary policy transmission is mixed in Kenya. Second, while the effect of monetary policy on stock price volatility is not significant, stock market volatility creates instability in monetary policy variables, implying that information from the stock market may be important in predicting the business cycle.

Originality/value

The paper provides useful policy insights to academicians, economists and central bankers who are interested in understanding the financial stability‐monetary policy nexus. This is important considering that most economies are emerging from the effects of the global financial crisis and they are thus enhancing financial stability measures. No such study that the authors are aware of has been conducted using data for Kenya.

Details

Journal of Economic Studies, vol. 39 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

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Article
Publication date: 13 November 2017

Isaac Ofoeda

This study aims to investigate the influence of corporate governance structures of non-bank financial institutions (NBFI) on their profitability.

Abstract

Purpose

This study aims to investigate the influence of corporate governance structures of non-bank financial institutions (NBFI) on their profitability.

Design/methodology/approach

The analysis is performed using data derived from the Bank of Ghana database during a nine-year period, 2006-2014. Correlated panels corrected standard errors model is used to estimate the regression equation. The study uses board size, board independence, gender diversity, CEO duality and tenure and board meetings as proxies for corporate governance. Audit committee size, independence and meetings are used as measures of audit committee activity. The study also uses the return on assets as measures of NBFI profitability.

Findings

Results of the study show that there exists positive relationship among board size, audit committee size, meetings of the audit committee and profitability. However, board composition, gender diversity, board meetings and audit committee independence show a negative relationship with NBFI performance. From the findings of the study, it is evident that there are mixed results regarding corporate governance mechanisms and profitability of Ghanaian NBFIs. The results imply that the Ghanaian NBFI industry have unique characteristics and may react differently to corporate governance structures.

Originality/value

The value of this study is in its contribution to the extant literature on corporate governance and profitability of NBFIs.

Details

International Journal of Law and Management, vol. 59 no. 6
Type: Research Article
ISSN: 1754-243X

Keywords

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