Explaining base money deviations from target: the case of Kenya
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Date
2010Author
Rutto, Nelson K
Type
ThesisLanguage
en_USMetadata
Show full item recordAbstract
In a bid to explain the cause of the frequent deviations of base money (reserve money) from programmed targets, the demand for reserve money ill Kenya is studied. Two models on the demand for currency outside banks and bank reserves, both components of reserve money, are estimated using Engel-Granger and Johansen approaches and an implied reserve money demand derived. The results suggest that the targets for reserve money have mostly been tighter than expected resulting in the frequent overshooting of the set monetary programme targets. However, even though the actual reserve money was in most cases above the reserve money demand, the deviations were no more than 5 percent and hence unlikely to have jeopardized the monetary programme by causing inflationary pressures.
Publisher
University of Nairobi, Kenya