European Parliament Library

Taylor Visits Africa, Carlos Goncalves

Abstract
Many low-income countries do not use interest rates as their main monetary policy instrument. In East Africa, for instance, targeting money aggregates has been pretty much the rule rather than the exception. Nevertheless, these targets are seldom met and often readjusted according to the economic environment. This opens up the possibility that central banks are de facto pursuing a strategy more akin to a Taylor Rule. Estimations of small-scale models for Kenya, Uganda and Tanzania suggest that these self-styled "monetary targeters" are respecting the Taylor Principle, that is are on average increasing nominal interest rates more than proportionally to inflation. Nevertheless, steep deviations from the Taylor Rule have taken place in Kenya and Tanzania. In Uganda, these errors are much smaller, in fact similar in size to Taylor Rule deviations found for Brazil. More surprisingly, they are smaller than South Africa’s, the continent’s sole long-term inflation targeter
Table Of Contents
Cover -- Contents -- 1. Introduction -- 2. Data -- 3. The small-scale model -- 4. Priors and shocks -- 5. Discussion -- 5.1. Estimations -- 5.2. Estimating the neutral rate instead of demeaning by the average -- 5.3. Taylor Principle vs Taylor Rule -- 6. Final comments -- Tables -- 1. Kenya 2000-11 -- 2. Kenya 2000-13 -- 3. Uganda 2000-11 -- 4. Uganda 2000-13 -- 5. Tanzania 2000-11 -- 6. Tanzania 2000-13 -- 7. Estimating neutral rates instead of demeaning -- 8. Brazil and South Africa -- Figures -- 1. Tanzania interest rates in the 1990s (red line is average) -- 2. Uganda interest rates in the 1990s (red line is average) -- 3. Normalized Taylor Rule's Residuals -- 4. Normalized Taylor Rule's Residuals - Brazil and Uganda -- 5. Normalized Taylor Rule's Residuals - Uganda and South Africa
Language
eng
Literary Form
non fiction
Physical Description
1 online resource (20 pages)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781513540771

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