A Dynamic Model of Inflation for Kenya, 1974-1996 Dick Durevall

ISBN: 9786613780737

Published: July 1st 1999

ebook

37 pages


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A Dynamic Model of Inflation for Kenya, 1974-1996  by  Dick Durevall

A Dynamic Model of Inflation for Kenya, 1974-1996 by Dick Durevall
July 1st 1999 | ebook | PDF, EPUB, FB2, DjVu, audiobook, mp3, ZIP | 37 pages | ISBN: 9786613780737 | 5.69 Mb

The objective of this paper is to model and explain inflation in Kenya over the period 1974 to 1996. To achieve this goal, we develop a single-equation error correction model. The period of study encompasses a number of policy changes and externalMoreThe objective of this paper is to model and explain inflation in Kenya over the period 1974 to 1996. To achieve this goal, we develop a single-equation error correction model. The period of study encompasses a number of policy changes and external shocks that are likely to have affected inflation.

Import substitution, the development strategy prevalent in the 1970s, was partially dismantled during the 1980s as several structural adjustment programs were implemented, and in the beginning of the 1990s there was a large-scale liberalisation of the economy. This entailed deregulation of the financial sector, removal of controls on retail and producer prices, and liberalisation of the current and capital accounts of the balance of payments. Exchange rate policy also changed- in 1982 a crawling peg replaced the adjustable peg, and in 1993 the Kenyan shilling started to float.

In addition, several external shocks such as the oil-price shocks in the 1970s, coffee booms in 1976/77, 1986 and 1993, and donors foreign aid embargo in 1991/92 hit the economy. Hence, finding an empirically stable and parsimonious model that describes the evolution of Kenyas inflation constitutes a major challenge.



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