Search results

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

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

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.

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.

The purpose of this paper is to examine the effect of digital financial innovation on financial depth and economic growth in Kenya.

The study utilized autoregressive distributed lag (ARDL) model, which is preferable over other time series methods as the model allows application of co-integration tests to time series with different integration orders and is flexible to the sample size including small and finite.

The main findings of this paper are as follows: first, there is evidence of a positive relationship between digital financial innovation and financial depth with the strongest impact emanating from Internet usage and mobile financial services and the lowest impact from bank branches; second, the results reveal a significant positive impact of financial depth on economic growth consistent with the supply-leading finance theory.

The results of the study imply a need for investment in technology-enabling infrastructure for digital financial services (DFS) and a redesign of strategies to avoid further financial exclusion of low-income earners due to the unaffordability of digital devices and financial and digital illiteracy.

The study is original and important for policymakers as the study provides insights on the components of financial innovation that are growth-enhancing in Kenya, considering that some aspects of innovation can be growth-retarding as was demonstrated during the global financial crisis.

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.

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

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.

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.

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.

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.

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.

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.

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.