Money Targeting in a Modern Forecasting and Policy Analysis System : an Application to Kenya /
We extend the framework in Andrle and others (2013) to incorporate an explicit role for money targets and target misses in the analysis of monetary policy in low-income countries (LICs), with an application to Kenya. We provide a general specification that can nest various types of money targeting (...
|a Money Targeting in a Modern Forecasting and Policy Analysis System :
|b an Application to Kenya /
|c Michal Andrle, Andrew Berg, Enrico Berkes, Rafael Portillo.
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|a Washington, D.C. :
|b International Monetary Fund,
|c 2013.
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|a 1 online resource (44 pages)
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|a IMF Working Papers
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|a <strong>Off-Campus Access:</strong> No User ID or Password Required
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|a <strong>On-Campus Access:</strong> No User ID or Password Required
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|a Electronic access restricted to authorized BRAC University faculty, staff and students
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|a We extend the framework in Andrle and others (2013) to incorporate an explicit role for money targets and target misses in the analysis of monetary policy in low-income countries (LICs), with an application to Kenya. We provide a general specification that can nest various types of money targeting (ranging from targets based on optimal money demand forecasts to those derived from simple money growth rules), interest-rate based frameworks, and intermediate cases. Our framework acknowledges that ex-post adherence to targets is in itself an objective of policy in LICs; here we provide a novel interpretation of target misses in terms of structural shocks (aggregate demand, policy, shocks to money demand, etc). In the case of Kenya, we find that: (i) the setting of money targets is consistent with money demand forecasting, (ii) targets have not played a systematic role in monetary policy, and (iii) target misses mainly reflect shocks to money demand. Simulations of the model under alternative policy specifications show that the stronger the ex-post target adherence, the greater the macroeconomic volatility. Our findings highlight the benefits of a model-based approach to monetary policy analysis in LICs, including in countries with money-targeting frameworks.
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|a Mode of access: Internet
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|a Berg, Andrew.
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|a Berkes, Enrico.
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|a Portillo, Rafael.
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|a IMF Working Papers; Working Paper ;
|v No. 2013/239
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|z Full text available on IMF
|u http://elibrary.imf.org/view/journals/001/2013/239/001.2013.issue-239-en.xml
|z IMF e-Library