Implication of the Taylor Rule on Real Exchange Rate Movement in Kenya
More often, persistent fluctuations in the real exchange rate tends to have significant adverse impact on prices, output and inflation expectations in an economy. Therefore, the ability to predict its movement over time with relative degree of accuracy is imperative for effective monetary policy formulation and implementation. In this study, we examine the movement of the Kenyan Shilling against the US Dollar by comparing fitted with the actual real exchange rate trends in the context of a modified Taylor rule. We find that, except for the period marked by exchange rate volatility, the modified Taylor rule maps well the actual movement in real exchange rate and hence, it can reliably be used to predict future trends in the real exchange rate.
Year of publication: |
2006
|
---|---|
Authors: | Nandwa, B. |
Published in: |
Applied Econometrics and International Development. - Euro-American Association of Economic Development. - Vol. 6.2006, 2
|
Publisher: |
Euro-American Association of Economic Development |
Subject: | Monetary policy | Taylor rule | exchange rate | central bank and Kenya |
Saved in:
Online Resource
Saved in favorites
Similar items by subject
-
Implication of the Taylor Rule on Real Exchange Rate Movement in Kenya
Nandwa, Boaz, (2008)
-
Monetary policy rules in emerging countries : is there an augmented nonlinear Taylor rule?
Caporale, Guglielmo Maria, (2016)
-
Monetary policy rules in emerging countries : is there an augmented nonlinear taylor rule?
Caporale, Guglielmo Maria, (2016)
- More ...