Search results

1 – 4 of 4
To view the access options for this content please click here
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

To view the access options for this content please click here
Book part
Publication date: 1 October 2014

Roseline Nyakerario Misati, Alfred Shem Ouma and Kethi Ngoka-Kisinguh

All over the world, the role of central banks is being redefined following the outbreak of the global financial crisis and subsequent breakdown of the “great moderation”…

Abstract

All over the world, the role of central banks is being redefined following the outbreak of the global financial crisis and subsequent breakdown of the “great moderation” consensus. Consequently, most advanced economies adopted non-conventional approaches of monetary policy which resulted in spill-overs to emerging markets and developing countries with implications on their financial system and monetary policy transmission. This, coupled with, internal developments in the financial systems of developing countries necessitated modifications of not only monetary policy frameworks but also responsibilities of most central banks. This chapter acknowledges possible evolutions of the financial structure variables in developing countries and uses data from Kenya to analyze the dynamic linkages between financial sector variables and monetary policy transmission in the light of the financial crisis. The study used structural vector autoregression to examine the relationship between financial structure variables and monetary policy as well as assess the relative importance of various monetary transmission channels in Kenya. The results show that the changing financial structure represented by credit to the private sector and stock market indicators in Kenya only slightly altered relative importance of monetary policy transmission. The insignificance of credit to the private sector suggests that the importance attached to the bank lending channel in previous studies is waning while the marginal significance of the stock market indicator signals the potential for asset price channel. The results also indicate that the interest rate and exchange rate channels are relatively more important in Kenya while the asset prices is only marginally significant and bank lending channel is the weakest in the intermediate stage of monetary policy transmission. However, transmission of monetary policy to the ultimate objectives is somewhat slow and weak to inflation and almost absent to output. The result implies a limited role of monetary policy on growth and questions the wisdom of pursuing multiple objectives.

Details

Risk Management Post Financial Crisis: A Period of Monetary Easing
Type: Book
ISBN: 978-1-78441-027-8

Keywords

To view the access options for this content please click here
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

To view the access options for this content please click here
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

1 – 4 of 4