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Back Matter

Back Matter

Author(s):
Andrew Berg, and Rafael Portillo
Published Date:
April 2018
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Index

A

  • Abuka, C. 101
  • acyclicality, of trade balance 62, 82, 84
  • ad-hoc models 136
  • Agenor, P. 136
  • agriculture, and GDP 65
  • Aguiar, M. 84
  • aid inflows
    • aggregation 217
    • alternative reserve policy 210, 222–3
    • asset holders 215–16
    • BOP (balance of payments) 219
    • calibrated parameters 224
    • capital account opening 229–30
    • central banks model 219
    • complete spending and absorption 210–11, 222, 225, 226
    • demand pressures 225–8
    • equilibrium conditions model 219–20
    • external balance 221
    • firms model 217–18
    • fiscal/reserve policy combinations 211, 221–3
    • and FX (foreign exchange) 211
    • government model 218–19
    • households model 215–17
    • incomplete reserve sterilization 230
    • internal balance 220–1
    • and limited capital mobility 211
    • LL (labour market equilibrium) 219
    • model results 212–13
    • model solution graphic representation 220–1
    • model used 211–12, 215–21
    • natural rate of interest 222–3
    • non-asset holders 216
    • non-asset holders exclusion 229
    • non-traded goods sector 217
    • policy interactions under sticky prices 223–30
    • real exchange rate 222–3
    • reserve policy 210, 222–3, 229–30
    • sensitivity analysis 228–30
    • short-run macroeconomics of 210–31
    • simulated results 224–5
    • spend/absorption data 226
    • spend/no absorption data 227
    • temporary real depreciation and demand pressures 228
    • traded goods sector 217
    • in Uganda 210, 213–15, 223–30
  • analytical issues, overview 135–41

B

  • Bai-Perron statistical test 72
  • balance of payment indicators 69–71
  • balance of payment shocks 62
  • balance of payments 219, 244
  • balance sheet effects on monetary policy, modelling see sterilized interventions
  • bank deposits 6
  • bank lending channel 99–101
  • Bank of Zambia 340, 372–3
  • banking sector shock 362–3, 372
  • BEAC (Banque des Etats de l’Afrique Centrale) 418, 434
  • behavioural lags 125–6
  • behind the curve 20
  • Berg, Andrew 13, 48
  • BoG (Bank of Ghana) 400, 401, 402, 406, 409
  • BOT (Bank of Tanzania) 110
  • BOU (Bank of Uganda) 33–52, 98, 110
  • BP (Band-Pass) filter 71, 73
  • business cycle dynamics 72–82

C

  • Cameroon see CEMAC
  • capital account openness 4, 69–71
  • capital flow shifts 102
  • capital flow shock 12, 71
  • CBK (Central Bank of Kenya) 95, 97, 98, 266, 268, 282–3, 300, 302–3, 310, 311, 325–6
  • CBR (Central Bank Rate) 39, 40, 42, 46–8, 95, 97, 98, 282, 325
  • CBs (central banks)
    • and aid inflows 219
    • balance sheets 238
    • central bank credibility 272, 399, 401
    • communications policy 20–1, 36, 45–6, 163
    • emergence/role of 2
    • and exchange rates 2, 236
    • financial sector behaviour 240–1
    • and fiscal deficits 3
    • fiscal policy and bank operations 13–14, 29
    • forward-looking strategy 20–1
    • and FX (foreign exchange) 2–3, 13–14, 16, 18, 24, 140, 238
    • and FX (foreign exchange) interventions 232–4
    • and FX (foreign exchange) reserves 238
    • implementation errors 163–8
    • incomplete information 163–8
    • independence of 14–16, 35
    • ineffectiveness of 20–1, 27–8, 163
    • and inflation 1–3, 16, 21
    • interest rate targets 150
    • and interest rates 13
    • IT development 21–2, 24
    • IT (inflation targeting) 15, 21–2, 24, 33–52, 90, 107, 234
    • lack of macro models 20
    • legal frameworks 14–15
    • measures of transparency in 21
    • monetary policy models 26–8
    • nominal anchor role 266
    • opacity in 19
    • operational frameworks in 17–19
    • policy implementation 165
    • policy implementation/design 19
    • policy intentions 164–5
    • and policy interest rates 118
    • policy rates 18
    • and price stability 16–17
    • and private sector expectations 152
    • profits 13
    • quantitative operations 144
    • reserve money targets 312
    • and shocks 94, 138
    • and supply-side shocks 138
    • transparency 126–9
    • see also MT (money targeting)
  • CEE-BB 118
  • CEE-CB 122, 125, 126
  • CEE-PS 118, 119, 122, 125, 126, 129
    • money target model 129
  • CEE-recursive structure 117–22
  • CEMAC (Communauté Economique et Monitaire de l’Afrique Centrale) region 25, 265
    • central bank 428
    • CFA franc exchange rate 420, 422
    • consumers 426–7
    • domestic inflation 423
    • domestic supply shocks 423–4
    • DSGE model 422, 425–9
    • firms 427
    • fiscal policy 419–22
    • fiscal shocks 424, 431
    • fiscal stance 421, 424, 425, 430
    • government 427–8
    • imported inflation 422–4
    • impulse response functions, and fiscal stance 430
    • impulse response functions, passive/active monetary policy 433
    • impulse response variations 425
    • inflation 430, 433
    • inflation determinants 272–3, 418–34
    • inflation and fiscal stance 420, 421
    • inflation and non-oil fiscal deficits 420
    • international reserves 430, 433
    • labour supply 427
    • market equilibrium conditions 428–9
    • model calibration results 429–33
    • model simulation results 429–33
    • monetary policy 422, 428
    • monetary policy, active/passive 431–2, 433
    • money growth 421, 422, 425, 430, 433
    • non-oil fiscal deficits 430, 433
    • non-oil GDP 420, 422, 430, 433
    • non-oil growth 421, 425
    • non-traded goods 427, 429
    • oil exports 418
    • oil revenues 427–8, 430
    • private absorption 433
    • real exchange rate 430, 433
    • real interest rate 433
    • structural shock assessment 424–5
    • structural shock variance decomposition 424
    • see also BEAC
  • Central African Republic see CEMAC
  • CFA franc zone 2, 25–7
  • Chad see CEMAC
  • Cholesky decompositions 117
  • Christiano, L. 117-22
  • CMA (Common Monetary Area) 25–6
  • commercial banking system, liberalization of 5
  • commodity price shocks 27
  • complete vs. incomplete information 165–7
  • Congo see CEMAC
  • consumption
    • and foreign interest rate shock 249, 250, 252
    • and quasi-permanent terms of trade shock 254
    • and temporary terms of trade shock 253
  • consumption basket/prices model 173–4
  • correlation between inflation and output gap, against income per capita 11
  • crawling-peg-like exchange rate 110
  • currency unions 25–6
  • cyclicality
    • of consumption/investment 82
    • of GDP components 73–8

D

  • data measurement error 57
  • debt relief, HIPC (highly indebted poor countries) 213
  • demand shocks 319, 334
  • demand side economies 66–7
  • detrending techniques 71–2
  • DFID (Department of International Development) ix
  • disinflation 271–2
  • domestic assets 241
  • domestic demand shock 325
  • domestic shock 12, 71
  • DSGE (dynamic stochastic general
  • equilibrium) model 27, 59, 113–19, 122, 129, 135, 265, 269, 270, 337, 368, 371, 422, 425–9

E

  • EAC4 see Kenya; Rwanda; Tanzania; Uganda
  • EAMU (East African Monetary Union) 25–6
  • East African Community 59
  • econometrics 59
  • economic fluctuations 61–86
    • characteristics of SSA economies 61–2
    • comovement across GDP components 79, 82, 83
    • country coverage 85–6
    • data 63
    • data sources 85
    • demand components and GDP 67
    • financial sector development 67–9, 69
    • GDP by sectors 66
    • income and growth 64–5
    • income per capita 64
    • key macroeconomic variables deviation 75–6, 78
    • methodological issues 71–2
    • and monetary policy 62
    • overview of SSA economies 64–71
    • real output growth 65
    • real output and inflation rates 81
    • real output volatility/persistence 73
    • real output/trade balance correlations 77
    • trade balance/openness to international trade 68
  • economic structure, and supply-side shocks 138–40
  • Eichenbaum, J.M. 117–22
  • EMs (emerging markets)
    • and FX interventions 233, 234
    • monetary policy targets 234
  • Equatorial Guinea see CEMAC
  • Evans, C.L. 117–22
  • exchange-rate, see also FX (foreign exchange)
  • exchange-rate arrangements 110
  • exchange-rate channel 101
  • exchange-rate classification 17
  • exchange-rate intervention 235–8
  • exchange-rate management 248
    • and foreign exchange 135
    • and IT (inflation targeting) 258
  • exchange-rate shocks 294
  • exchange-rate targeting 235–8
  • external revenue management 13–14
  • external risk shocks 270, 337, 360–3
  • external shocks 62, 69–71, 83–4, 270, 272–3, 294

F

  • facts on the ground, and MTM 112–13
  • financial depth 107
  • financial depth indicators 341
  • financial openness 109
  • financial programming ix, 3, 143
  • financial sector balance sheets 238
  • first-round effects
    • equilibrium model/definition 177
    • international food price shocks 169–84
  • fiscal dominance 12, 36–8, 143
  • fiscal policy
    • and central banks 13–14, 29, 36–8
    • and external shocks 360
    • and volatility 12–14
  • fiscal pro-cyclicality 12
  • fiscal-based stabilization efforts 3–5
  • fiscal/international reserve policy interaction 210–31
  • fixed exchange rate implementation 250
  • flexible exchange rates 17
  • flexible money targeting 110
  • float exchange rate 110
  • food price shocks 11, 23, 169–84, 269, 289, 294
    • see also international food price shocks
  • food production shock 198
  • food subsistence model
    • calibration 191, 195–6
    • consumers and producers 191–3
    • exogenous monetary policy loosening 196–8
    • food price flexibility 189
    • food production 197, 199
    • food sector productivity 199
    • food share in consumer price index/income per capita 189
    • headline inflation 197, 198, 199
    • headline inflation and output/income per capita 190
    • impulse response analysis 196–8
    • inflation volatility and income 189–90
    • instrument rules 205–7
    • and LAMP (limited asset market participation) 203–7
    • log-linearization 193–5
    • model extension 203–7
    • model of 191–200
    • monetary policy deviation 197
    • monetary policy shock 197, 289
    • natural rate of interest 199
    • negative shock to food production 198
    • nominal interest rate 197
    • non-food inflation 197, 199
    • non-food production 197, 199
    • optimal monetary policy and food subsistence 200–2
    • output 197, 199
    • output gap standard deviation 203
    • related literature 188
    • relative food price 193
    • relative food price change 197, 199
    • second-order 198–200
    • and SLM (segmented labour markets) 203–7
    • structural transformation 193
    • stylized facts on developed/developing countries 189–90
    • subsistence and food share 202–3
    • targeting rules 205–7
    • welfare analysis 200–3
    • welfare loss standard deviation 203
    • welfare losses at alternative food-inflation weights 205
  • food supply shock 206
  • foreign aid 66–7
  • foreign demand shock 323
  • foreign interest rate shock 234, 247–51, 256
  • foreign interest rates autoregression 244
  • FPAS (Forecasting and Policy Analysis System) 28, 375, 396
  • free float exchange rate 110
  • Freedman, C. 34, 35, 51
  • Friedman, M. 148
  • fuel price shocks 269
  • fuel prices 11
  • FX (foreign exchange) 3, 13
    • and aid inflows 211
    • bank arrangements 110
    • and central banks 2–3, 13–14, 16, 24, 238
    • flexibility 14–21, 24
    • floating 11, 17
    • nominal effective indices 44
    • and policy frameworks 16
    • real effective indices 44
    • role of 24
    • and supply shocks 11
    • see also exchange rate
  • FX (foreign exchange) classification 4
  • FX (foreign exchange) intervention literature 237–8
  • FX (foreign exchange) interventions 136
    • and EMs (emerging markets) 233
    • and monetary policy 232–4
    • and reserve accumulation 140–1
  • FX (foreign exchange) management 13–24
  • FX (foreign exchange) markets 12–13
  • FX (foreign exchange) reserves, and CBs (central banks) 238, 240

G

  • Gabon see CEMAC
  • Garcia-Cicco, J. 84
  • GDP estimates 57–8
  • Ghana
    • Bank of Ghana Act (2002) 400
    • baseline with full credibility 405
    • baseline IT (inflation targeting) 404
    • BoG (Bank of Ghana) 400, 401, 402, 406, 409
    • central bank credibility 272, 401
    • central bank inflation targeting 21
    • central bank legislation 14, 16
    • CPI inflation 400, 401
    • credibility stock 399, 404, 405, 406, 407, 408
    • demand shock 407–8
    • disinflation costs 271–2
    • disinflation model 402
    • disinflation policy challenges 399–400
    • disinflation recommendations 409–10
    • disinflation under imperfect credibility 403–4
    • disinflation under perfect credibility 404–9
    • dynamic responses to shocks 402–10
    • economic (New Keynesian) model used 401, 411–17
    • endogenous credibility 271–2, 402, 413
    • equilibrium values 412, 415
    • excess productive capacity 404
    • exchange rate equation 401, 412, 413, 416
    • expectations process and credibility 413–14
    • IFT (inflation forecast targeting) 398–417
    • inflation 5, 21, 272, 408
    • inflation rate equation 401, 413
    • inflation trends (2007) 400–1
    • interest rate increase delays under imperfect credibility 408–9
    • IT (inflation targeting) 21, 399–400, 411
    • monetary policy loss function 402, 403, 413, 416–17
    • negative supply shock 406
    • nominal interest rate 404, 405, 406, 407, 408
    • non-linear output gap 413, 414–15
    • non-linear Phillips curve 402, 415
    • optimal disinflation, linear versus optimal 410
    • output gap equation 401, 412, 415–16
    • policy credibility 27–8
    • positive demand shock/delayed policy response 408
    • positive supply shock 407
    • real exchange rate 404, 405, 406, 407, 408
    • real GDP growth 404, 405, 406, 407, 408
    • supply shock 405–7
    • sustained growth 5
  • global commodity prices 103
  • global crisis, and monetary policy see Zambia
  • global risk appetite 102–6
  • global risk aversion 102, 105
  • Gopinath, G. 84

H

  • hard peg exchange rates 17, 25–6
  • HIC (high-income countries) statistics 63–82
  • HIPC (highly indebted poor countries), debt relief 213
  • households balance sheets 238
  • households’ behaviour 241–2
  • HP (Hodrick and Prescott) filter 71, 73

I

  • IFEM (interbank foreign exchange market) 44, 45
  • IFT (inflation forecast targeting) see Ghana
  • IMF Articles of Agreement, Article VIII 14
  • IMF (International Monetary Fund) ix, 1, 3, 4, 18, 22, 34, 37, 143, 175, 265, 267, 311
  • implementation errors, and monetary policy 163–8
  • impulse responses
    • and complete/incomplete information 167–8
    • and power functions: CEE-CB baseline 122
    • to monetary policy shock 120–1
  • incomplete information, and monetary policy 137–8, 163–8
  • incomplete reserve sterilization, aid inflows 230
  • indicator variables 148
  • inflation
    • and CBs (central banks) 1–3, 16, 21
    • core inflation 23–4, 40
    • and external shocks 272–3
    • and fiscal policy 272–3
    • and foreign interest rate shock 249, 252
    • implications of food subsistence 186–208
    • medium-term target 16–17
    • and monetary policy 139, 266
    • and monetary policy shock 120, 121, 123, 124, 125, 129
    • and money demand 324
    • and output fluctuations 79, 79–81
    • and output gap 11, 129, 149
    • and price puzzle 131
    • and quasi-permanent terms of trade shock 254
    • in SSA 6
    • and temporary terms of trade shock 253
    • see also Uganda
  • inflation rates 65
  • inflation shocks 334
  • inflation sources in Kenya see Kenya
  • inflation stabilization 1, 5, 139–40, 271
  • inflation targeting see IT
  • inflation volatility 12
  • information sets 125
  • instrument rules 205–7
  • interbank rate 94
  • interest rates
    • and CBs (central banks) 13
    • liquidity puzzle 131
    • and monetary policy shock 120, 121
    • and money growth 158
  • interest-rate channel 99
  • interest-rate elasticity 123, 147
  • interest-rate shocks 120, 121, 155, 234
  • interest-rate smoothing 125
  • interest-rate volatility 158
  • international capital markets 70
    • and supply-side shocks 139
  • international food price shocks 169–84
    • and CM (complete markets) 170, 171, 177, 178, 181–4
    • analytical solution 178–82
    • consumption basket/prices 172, 173–4
    • and CPI (consumer price index) 169, 171, 182
    • and CPI gross inflation 174
    • and current account surpluses 171
    • demand functions 173
    • equilibrium conditions 176, 177
    • and FA (financial autarky) 171, 178, 180–4
    • first-round effects 169–84
    • first-round effects, identifying 175–6, 183
    • first-round effects, solving for 180–2
    • first-round equilibrium effects, definition of 177
    • and IM (incomplete markets) 171, 177, 179, 181–4
    • income effects 171
    • inflation/relative prices/first-round effects link 179–80
    • and inter-temporal substitution 170
    • and inter-temporal utility maximization 173
    • log-linear version of model 178–80
    • market clearing conditions 176–7
    • and net foreign asset position 172
    • non-traded sector 174–5
    • representative consumer 172–3
    • steady state 177
    • see also food price shocks
  • international reserve/fiscal policy interaction 210–31
  • international reserves
    • and foreign interest rate shock 249, 250, 252
    • and quasi-permanent terms of trade shock 254
    • and temporary terms of trade shock 253
  • intervention rule 248
  • IRIS toolbox 356
  • IT (inflation targeting) 15, 21–2, 24, 33–52, 90, 107, 110, 234, 310, 399, 404
    • and exchange-rate management 258

K

  • Kenya
    • actual reserve money 329
    • bank lending channel 99–101
    • broad money targets 303, 325
    • CBK (Central Bank of Kenya) 95, 97, 98, 266, 268, 282–3, 300, 302–3, 310, 311, 325–6
    • central bank policy 302–3
    • central bank rate 282–3, 300, 303, 325–6
    • central bank repo rates 300
    • commodity price shock/inflation 90
    • CPI inflation 288, 301
    • credit targets 303
    • currency levels 103
    • decomposition into shocks 293–7
    • decomposition into trends and gaps 291–3
    • demand shocks 319, 334
    • deviation from reserve money targets 19
    • domestic demand shock 325
    • economic indicators 93
    • economic (New Keynesian) model 305, 319–33
    • excess reserves 107–8
    • exchange rate arrangements 110
    • exchange rate channel 101
    • exchange rate growth 324, 325
    • exchange rate shocks 294
    • financial depth indicators 341
    • financial sector indicators 93
    • food inflation 275, 286, 289–90, 296–7
    • food price deviation 291, 292
    • food prices 280, 283, 284, 294
    • forecasting model 266–9
    • foreign block equations 281–2
    • foreign demand shock 323
    • headline inflation 290, 298
    • hybrid policy rule 321
    • impulse response functions 289, 290
    • inflation 5, 95, 106, 109
    • inflation components 290
    • inflation developments/monetary policy 282–3
    • inflation model 277–302
    • inflation model calibration 283–7
    • inflation model data 287–8, 305
    • inflation and money demand 324
    • inflation shocks 334
    • inflation sources 274–307
    • inflation targeting 90–1, 107
    • interest rate channel 99
    • interest rate framework 145
    • interest rate rule 314–15
    • intermediate cases 317–19
    • IT (inflation targeting) 310
    • Kalman filter/smoother 290, 305–7
    • liquidity shock 316
    • log-real-per capita GDP 72
    • model application 324–33
    • model key features/properties 319–24
    • model simulation 305
    • model solving 305
    • model standard deviations 319, 321
    • monetary policy 314–19
    • monetary policy framework 110
    • monetary policy and inflation 302
    • monetary policy and interest rates 303–4
    • monetary policy interpretation, model based 297–9
    • monetary policy regime 325–6
    • monetary policy rule 281
    • monetary policy shocks 294, 300, 317, 333, 334
    • monetary policy transparency 282
    • monetary policy/inflation developments 282–3
    • monetary transmission mechanism 89–110
    • money aggregates 94, 312
    • money block parameters calibration 320
    • money demand 313–14, 326–7
    • money demand calibration 320
    • money demand growth rate 314
    • money demand shocks 319, 321, 324, 333, 334
    • money growth, filtered/predicted 328
    • money growth target 315–17
    • money and monetary policy regime 325–6
    • money multipliers 328
    • money target adherence 309, 310–11, 330–1
    • money targeting 145–6, 267–8, 304, 309–35
    • money targeting empirical application 324–33
    • money targeting frameworks 311–13
    • money targeting in New Keynesian model 313–24
    • money targets 146, 267–8, 282, 310, 320, 327–34
    • money velocity 320, 321, 328
    • NBK (National Bank of Kenya) 110
    • nominal depreciation 290, 299
    • nominal interest rate 290
    • non-food inflation 275, 286, 289–90, 295, 296
    • non-food prices 280, 284
    • output gap 290, 293, 294, 297, 301
    • output growth 327
    • output rates 279, 284
    • overnight interbank rate 326
    • Phillips curves 280
    • policy analysis model 266–9
    • policy rate baseline calibration 301
    • policy rate and domestic demand shock 325
    • policy rate and money demand 324
    • policy rate, no monetary policy shocks 301
    • policy stance and target misses 331
    • price indices 277–8
    • real exchange rates 291
    • real food prices 291
    • real interest rates 279, 284, 293, 301
    • real monetary conditions index 290
    • real money growth 327
    • relative prices 277–8
    • relative prices trends 278–9, 284
    • reserve money deviations from target 332
    • reserve money target misses 331, 334
    • reserve money targets 146, 282, 315, 325, 329
    • sectoral inflation rates 293
    • shock decomposition 293–7, 307
    • short-term interest rates 287
    • structure of the economy 92–4
    • supply-side shocks 139, 300
    • Taylor rule 310, 312, 317–18, 320, 326
    • UIP (uncovered interest parity) exchange rate 281, 285, 313
    • VECM estimates 330
    • VIX exchange rates 104

L

  • labour market equilibrium 244
  • LAMP (limited asset market participation) 203–7
  • Laxton, Douglas ix
  • legal frameworks, monetary policy 14–15
  • Ley, E. 58
  • Li, B. 131
  • LIC-specific features 136
  • liquidity puzzle, interest rates 131
  • liquidity shocks 324
  • LLMIC (lower-middle-income/low-income countries) statistics 63–82
  • log-linearization 245, 246–7

M

  • macro models, in central banks 20
  • macroeconomic data, lack of 57
  • macroeconomic model, Rwanda see Rwanda
  • macroeconomic stability 5
  • macroeconomic variables, Uganda 214
  • macroeconomic volatility 10–14, 61–2
  • MFPED (Ministry of Finance, Planning and Economic Development) 37–8
  • Misch, F. 58
  • Mishra, P. 122–5, 131
  • model solution, complete/incomplete information 166–7
  • modelling strategy 20–1, 26–8, 62
  • modernization, of monetary policy in SSA 21–4
  • monetary aggregates 94, 143–4, 160–1, 267, 271
  • monetary frameworks, and policy 135
  • monetary policy
    • first round effects model 175–6
    • and FX (foreign exchange) interventions 232
    • and global crisis see Zambia
    • implications of food subsistence 186–208
    • and incomplete information 137–8
    • and inflation 139
    • and interest rates 144
    • modelling sterilized interventions and balance sheet effects of 232–59
    • and supply shock 104
    • targets in EM (emerging markets) 234
  • monetary policy contraction 100
  • monetary policy shocks 10–12, 57, 120–1, 123, 124, 125, 128, 197, 289, 294, 300, 317, 333, 334
  • monetary policy in SSA
    • brief history of 2–5
    • challenges for 5–14
    • current state of 14–21
    • de jure frameworks 15, 16
    • frameworks in SSA 15, 16
    • modernization of 21–4
    • monetary transmission mechanism 8–10
    • narrative approach to 89
    • pegs 15
    • pressures on 12–13
    • signal extraction problem 153–5
    • tightening 89–90
  • money aggregates 94, 269, 312
  • money demand 268–9, 320
  • money demand shocks 18, 127, 128, 319, 321, 324, 334
  • money growth 151
  • and interest rates 158
  • money supply shocks 128
  • money targeting see MT
  • money targets 146, 267–8, 282, 320, 327–34
  • and monetary policy see Kenya
  • Montiel, P. 122–5, 131, 136
  • Mozambique
    • central banks and foreign exchange 13
    • deviation from reserve money targets 19
    • monetary targeting 145–6
    • reserve money targets 146
  • MPC (Monetary Policy Committee) 39
  • MT (money targeting) 15, 18, 27, 33–6, 93–4, 107, 110, 127, 137–8, 145–6, 267–8, 304, 309–35
    • flexibility of 145
    • frameworks 311–13
    • and IMF 143
    • in Kenya see Kenya
    • LIC information gaps 147–8
    • models used 149–56, 164–5
    • monetary policy model 150
    • monetary reaction function with money 146–9
    • MT frameworks 311–13
    • noisy measure of economic activity 159–60
    • noisy measure of relevant interest rate 157–9
    • in practice 145–6
    • reserve money targets deviation characteristics 146
    • role in monetary policy framework 155–60
    • in Rwanda see Rwanda
    • signal extraction 147, 150–2
    • solution under complete information model 151
    • solution under incomplete information model 151–2
    • in Tanzania see Tanzania
    • target adherence 137, 147
    • in Uganda see Uganda
    • in Zambia see Zambia
  • MTM (monetary transmission mechanism) 8–10, 48, 89–110, 112–31
    • and CEE-recursive structure 117–22
    • and central bank transparency 126–9
    • and DSGEs 113–19, 122, 129
    • environment for monetary policy 92–4
    • event study 94–102
    • financial sector 92–4
    • global risk 102–6
    • interest rate channel 99
    • interpretations of 113
    • in LICs 112–13, 118, 129–31
    • model-based impulse responses 119
    • structure of the economy 92–4
    • supply shock 102–6
    • and SVAR 112–14, 125, 128
    • and VAR 112–14, 118, 119–21, 122, 129–31
    • weak transmission 122, 123, 125

N

  • National Bank of Rwanda 98
  • natural resource rents 66
  • NBK (National Bank of Kenya) 110
  • NBR (National Bank of Rwanda) 110, 375, 377, 379, 396, 397
  • negative food supply shock 206
  • Nigeria
    • inflation 5
    • sustained growth 5
  • nominal exchange rate, and foreign interest rate shock 249, 252
  • nominal money growth 150
  • non-traded producers 242–3
  • non-traded sector model 174–5
  • operational frameworks, CBs (central banks) 17–19
  • Opolot, J. 48
  • Otker-Robe, I. 34, 35, 51
  • output
    • and quasi-permanent terms of trade shock 254
    • and temporary terms of trade shock 253
  • output gap
    • complete/incomplete information 168
    • and inflation 11, 129, 149
    • and monetary policy shock 120, 121, 123, 124, 126, 129
    • and money demand 324
    • and power function 123, 124, 125, 129
  • output gap models 149, 293
  • output gap shocks 293
  • output growth 151
  • output shocks 155
  • output volatility 72–3

P

  • Pedroni, P. 131
  • policy framework modernization 135
  • policy rate 94, 97–9, 269, 270
    • and foreign interest rate shock 249, 252
    • and money demand 324
    • and quasi-permanent terms of trade shock 254
    • and temporary terms of trade shock 253
  • policy shock 83–4
  • Poole, W. 148
  • Portillo, R. 170, 171, 184
  • power functions
    • for inflation 123, 124, 125, 129
    • for monetary policy shock 120
    • and output gap 123, 124, 125, 129
  • Prescott, E.C. 61
  • price puzzle, and inflation 131
  • price setting 27
  • price stability, and CBs (central banks) 16–17
  • productivity shocks, in food sector 205

Q

  • QPM (quarterly projection model) 39
  • quantity theory MV=PQ 143
  • quasi-permanent terms of trade shock 254, 256, 258

R

  • R&R (Romer and Romer) approach 89, 90
  • Rand Monetary Area 2, 25
  • rational expectations models 271
  • reaction function 27
  • real effect exchange rate, and monetary policy shock 120, 121
  • real exchange rate
    • and foreign interest rate shock 250
    • and quasi-permanent terms of trade shock 254
    • and temporary terms of trade shock 253
  • real exports 74
  • real GDP 244
  • real interest rates 279
  • relative volatility 167
  • remittances 66–7
  • representative consumer model 172–3
  • reserve accumulation, and FX intervention policies 140–1
  • reserve losses 258
  • reserve money targets
    • CBs (central banks) 312
    • deviations from 19
  • reserve sterilization, aid inflows 230
  • RMT (reserve money targeting) 17–19, 22
  • Rwanda
    • aggregate demand 380
    • aggregate supply 380–1
    • bank lending channel 99–101
    • capital mobility 382
    • commodity price shock/inflation 90
    • core inflation 380, 386, 387, 388
    • core inflation equation 385
    • core inflation shock decomposition 391
    • core inflation variable 395
    • CPI 378
    • data series 384
    • debt relief 377
    • demand shocks 386
    • deviation from reserve money targets 19
    • economic indicators 93
    • economic model 376, 379–83
    • economic model calibration 376, 383–8
    • economic model data 383–8
    • economic model data filtration 376, 388–96
    • economic model forecast 393–6
    • economic (New Keynesian) model 376–96
    • economic overview 376–9
    • excess reserves 107–8
    • exchange rate 376, 378, 379, 381, 382
    • exchange rate arrangements 110
    • exchange rate determination 381–2
    • exchange rate rule 385
    • financial depth indicators 341
    • financial openness 107
    • financial sector indicators 93
    • food inflation 378, 381, 386, 387, 388
    • food inflation equation 385
    • food inflation shock decomposition 392
    • food inflation variable 395
    • food price shock 269
    • forecasting model 266–9, 393–6
    • foreign aid 376
    • foreign block 383, 385
    • fuel inflation 378
    • fuel price shocks 269
    • headline inflation equation 380, 381, 385
    • headline inflation shock decomposition 391
    • headline inflation variable 395
    • impulse response functions 386, 387, 388
    • in-sample forecast 393–4
    • inflation 106
    • inflation targeting 90–1, 377, 382
    • interest rate 386, 387, 388
    • interest rate channel 99
    • interest rate policy rule 382
    • interest rate shock 388
    • KRR (Key Repo Rate) 377, 379
    • long-run trends 382–3
    • long-run values 385
    • monetary policy framework 110
    • monetary policy implementation 379
    • monetary policy regime 376–9
    • monetary policy rule 385
    • monetary policy tightening 89, 97
    • monetary targeting 145–6
    • monetary transmission mechanism 48–9, 89–110
    • money aggregates 269
    • money targeting 93–4
    • NBR (National Bank of Rwanda) 110, 375, 377, 379, 396, 397
    • nominal exchange rate (Franc/USD) variable 396
    • nominal interest rate variable 382, 396
    • oil inflation 377, 386, 387, 388
    • oil inflation equation 385
    • oil inflation shock decomposition 392
    • out-of-sample forecast 394–6
    • output gap 380, 386, 387, 388, 390
    • output gap equation 385
    • output gap shock decomposition 393
    • output growth 396
    • output trend 390
    • policy analysis model 266–9
    • policy rate 269
    • real exchange rate gap 386, 387, 388, 389
    • real exchange rate trend 381, 389
    • reserve money targets 146
    • selected economic indicators 340, 378
    • semi-structural macroeconomic model 375–97
    • steady state values 385
    • structure of the economy 92–4
    • trends 385
    • UIP 375, 382
    • VIX exchange rates 104
    • world food price variable 394
    • world oil price variable 394

S

  • seigniorage 13
  • semi-structural gap model 267
  • semi-structural macroeconomic model, Rwanda see Rwanda
  • shocks as main drivers 62, 83–4
  • SLM (segmented labour markets) 203–7
  • soft peg exchange rates 17
  • sovereign assets and liabilities 70, 71
  • Spilimbergo, A. 124, 131
  • sterilization operations 13, 44
  • sterilized aid inflows 230
  • sterilized interventions modelling
    • balance of payments 244
    • balance sheet modelling 258
    • central bank behaviour 239–40
    • domestic assets 241
    • exchange rate targeting 235–8
    • exchange rate targeting literature 235–6
    • exporters 243
    • financial sector behaviour 240–1
    • foreign interest rate shock 247–51
    • FX (foreign exchange) intervention literature 237–8
    • households’ behaviour 241–2
    • importers 243
    • intervention limits 256–8
    • intervention rule 248
    • labour market equilibrium 244
    • log-linearization 245, 246–7
    • model calibration 245, 246–7
    • model description 238–44
    • monetary policy definition 235
    • non-traded producers 242–3
    • real GDP 244
    • rest of the world 244
    • second-order approximation to utility 259
    • sectoral balance sheets 238
    • simulations 247–58
    • steady state 245
    • trade terms shock 251–5
    • welfare analysis 255–6
  • sticky prices 228
  • Stock, J.H. 73
  • subsistence see food subsistence
  • supply shocks 10–12, 23–4, 27, 62, 83, 102–6, 108, 128, 135, 139, 266, 300, 319
    • and international capital market access 139
    • second-round spillovers 138
    • and structure of the economy 138–40
  • SVAR, and MTM (monetary transmission mechanism) 112–14, 125, 128

T

  • Tanzania
    • bank lending channel 99–101
    • BOT (Bank of Tanzania) 110
    • central banks and foreign exchange 13
    • commodity price shock/inflation 90
    • deviation from reserve money targets 19
    • economic indicators 93
    • emerging/frontier markets real exchange rates 103
    • excess reserves 107–8
    • exchange rate arrangements 110
    • exchange rate channel 101
    • financial depth indicators 341
    • financial openness 107
    • financial sector indicators 93
    • inflation 5, 95, 106
    • interest rate channel 99
    • monetary policy framework 110
    • monetary policy tightening 89, 97, 98
    • monetary targeting 145–6
    • monetary transmission mechanism 48–9, 89–110
    • money targeting 93–4, 107
    • output 101–2
    • reserve money targets 146
    • selected economic indicators 340
    • structure of the economy 92–4
    • VIX exchange rates 104
  • target adherence 309
  • targeting rules 205–7
  • Taylor rule/principle 41, 116, 127, 148, 248, 303–4
  • temporary terms of trade shock 253, 256
  • terms of trade shocks 253, 337, 357, 365, 367
  • trade balance, and foreign interest rate shock 249, 250, 252

U

  • UEMOA 25
  • Uganda
    • aid inflows 210, 213–15, 223–30
    • average lending rate 47
    • bank lending channel 99–101
    • BOU (Bank of Uganda) 33–52, 98, 110
    • broad money 34
    • CBR (Central Bank Rate) 39, 40, 42, 46–8
    • central bank communications strategy 45–6, 52
    • central bank independence 35
    • central banks and foreign exchange 13
    • challenges to monetary policy implementation 42–3
    • commodity price shock/inflation 90
    • economic indicators 93
    • excess reserves 107–8
    • exchange rate arrangements 110
    • exchange rate channel 101
    • exchange rate effective indices 44
    • exchange rate policy 33, 43–5
    • exchange rate volatility 43–4, 214
    • financial depth indicators 341
    • financial sector indicators 93
    • fiscal dominance 36–8
    • fiscal/monetary policies separation 36–8, 52
    • government borrowing from BOU 37–8
    • Gross Nominal Public Debt, and GDP 36
    • inflation 5, 39–41, 95, 106, 109
    • inflation forecasts 39, 40, 51
    • inflation targeting 21, 33–52, 90, 91, 107
    • interbank foreign exchange 44
    • interbank lending 41
    • interbank rate 47
    • interest rate channel 99
    • interest rate transmission mechanism 46–8
    • interest rates 41
    • macroeconomic variables 214
    • market interest rates and macroeconomic variables 48–9
    • MFPED 37-8
    • model calibration 228, 230
    • monetary policy formulation 39–41, 43–5
    • monetary policy framework 110
    • monetary policy implementation 41–3, 48, 52, 89
    • monetary policy instruments 42–3, 51
    • monetary policy in IT framework 46–50
    • monetary policy tightening 89, 97, 98
    • monetary transmission mechanism 48–9, 89–110
    • money aggregates 94
    • MPC (Monetary Policy Committee) 36, 40, 45–6
    • MPS (Monetary Policy Statement) 36, 40, 45–6
    • MT (money targeting) 33–6
    • public debt 36–7
    • public spending 214
    • repos/reverse repos 41-2
    • selected economic indicators 340
    • sterilized intervention 44–5
    • structural liquidity 42–3
    • structure of the economy 92–4
    • VIX exchange rates 104
  • UIP (uncovered interest parity) 236, 240, 281, 285, 375, 382
  • UMIC (upper-middle-income countries) statistics 63–82
  • UN Millennium Development Goals 213

V

  • VAR model/evidence 26, 39, 57, 58, 89, 109, 272, 290–1, 424, 425
    • and MTM (monetary transmission mechanism) 112–14, 118, 119–21, 122, 129–31
  • velocity of broad money (M2) 34
  • VIX 104
  • volatility
    • of consumption/investment 82, 84
    • of GDP components 73–8
    • and growth/inflation performance 82
    • of interest rates 94
    • and monetary policy 266
    • of real exchange rate 83
  • Volker disinflation 59

W

  • wage setting 27
  • Watson, M.W. 73

Z

  • Zambia
    • aggregate demand 338, 356
    • arbitrage conditions 346
    • balance of payments model 349
    • Bank of Zambia 340, 372–3
    • banking sector model 346–8, 351
    • banking sector shock 362–3, 372
    • banking system 270, 338
    • banks and risk 337–8, 347, 355
    • baseline results 356–60
    • and capital flow 12
    • commodity terms of trade index 342
    • core model structure 342–9
    • CPI inflation 353, 354, 357, 365, 367
    • credit to private sector 353, 354, 357, 362, 365, 367
    • credit to public sector 357, 362, 365, 367
    • crisis replication 355–6
    • current account GDP 342, 357, 365, 367
    • domestic firms 345
    • DSGE models 337, 368, 371
    • excess liquidity 338, 348, 357, 365, 367, 369
    • exports 270, 339
    • external risk shocks 270, 337–8, 360–3
    • financial depth indicators 341
    • financial variables 337, 372–3
    • fiscal policy 336, 360
    • food price inflation 369, 370
    • GDP composition by sector 339–40
    • global financial crisis impact/response 270–1, 336–73
    • government spending/GDP 357, 365, 367
    • high-powered money growth 357, 365, 367
    • households model 343–4
    • impulse response functions 353, 354
    • imputed quarterly real GDP 359
    • inflation 5, 271, 361, 366
    • initial monetary response to global crisis 369–71
    • lending rates 337, 353, 354, 357, 361, 363, 365, 367
    • macroeconomic variables 337, 372–3
    • model blocks 343
    • model calibration 350–3
    • model functional forms 350–3
    • monetary policy and global crisis 270–1, 336–73
    • monetary policy regime 270–1
    • monetary policy responses 366
    • monetary variables and structural shocks 363, 364
    • money multiplier 337
    • money policy response role 363–6
    • money targeting 20
    • money targets 370
    • nominal depreciation 337, 338, 366
    • nominal exchange rate 353, 354, 356, 357, 361, 365, 367, 369
    • nominal rigidities role 368–9
    • non-food price inflation 369
    • policy rate changes 270
    • private absorption 357, 365, 367, 368
    • private spending 366
    • real depreciation 337
    • real exchange rate 342
    • real GDP growth 353, 354, 357, 359, 365, 367
    • real imports 353, 354, 357, 362, 365, 367
    • real money demand 353, 354
    • relationship with rest of world 349
    • reserve money growth 348
    • reserve money targets 370, 371
    • revenues/GDP 357, 365, 367
    • selected economic indicators 340
    • shock decomposition 360–3
    • shocks overview 353–5
    • steady state ratios 351
    • structural shocks 361–4
    • supply shocks 358
    • T-bill rate 337, 353, 354, 356, 357, 363, 365, 367, 369
    • terms of trade shocks 337–8, 350, 357, 365, 367
    • Zambian economy and global financial crisis 339–42
  • Zanna, L.F. 170, 171, 184
  • Zimbabwe, central bank independence 16

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