Monetary Policy Transmission Mechanism in East Africa: A Comparative Study of Tanzania, Kenya And Uganda

Authors

  • Hamza A. Mkai University of Dar es Salaam
  • Jehovaness Aikaeli University of Dar es Salaam

Abstract

This study makes a comparative analysis of the channels and effectiveness of the transmission mechanisms of monetary policy in three East African countries. The study applies time series data that is analysed using a Recursive Vector Autoregressive technique. The results suggest that exchange rate is the dominant monetary policy transmission channel in Tanzania and Uganda; and the bank credit channel is found to be the most dominant mechanism in Kenya. Further, the results suggest the existence of good potential for targeting inflation or interest rate rather than monetary aggregates, especially for Tanzania and Kenya, since Uganda has already embarked on inflation targeting lite, and is currently faring well.

Keywords: monetary policy, reserve money, interest rate, inflation

JEL Classification: E31, E37

Author Biographies

Hamza A. Mkai, University of Dar es Salaam

Department of Economics

Jehovaness Aikaeli, University of Dar es Salaam

Department of Economics

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Published

2020-11-14

Issue

Vol. 10 No. 1 (2020): Tanzanian Economic Review

Section

Articles