The paper analyzes the relationship between remittances and financial development using Kenyan quarterly data from 2006 to 2016. Five different indicators of financial development are used: credit to the private sector as a share of GDP, the number of mobile transactions, the value of these mobile transactions, the number of mobile agents, and the number of bank accounts. The results from using an autoregressive distributed lag demonstrate a strong, positive relationship between remittances and financial development in long-run equations. This suggests that higher levels of remittances provide opportunities for recipients to open bank accounts, enhance their savings, and access financial systems, in addition to exposing the previously unbanked to both new and existing financial products. The results also confirm the potential advantage of embracing modern and advanced technology to facilitate international mobile transfers. Using international remittance transfers through mobile technology reduces costs by eliminating the need for physical branches and personnel to attend to walk-in customers. Aside from offering convenience and safety for remittance actors, this method also dominates traditional remittance business models. Therefore, a policy window exists for the government to leverage on remittances as a tool of financial inclusion and depth, and particularly through the continued expansion of regulatory space to accommodate the wider use of international mobile remittance transfer channels. Moreover, given the strong, positive relationship between remittances and credit to the private sector as indicated by its share of GDP and number of bank accounts, commercial banks and other players in the remittance market may also find it useful to develop customized products for migrants to access their remittances. For example, financial intermediaries can consider providing better deposit interest rates for diaspora deposits compared to deposits made in the local currency. Further, these institutions can allow regular remittance flows to act as collateral for the allocation of credit, among other incentives to tap into the significant potential of money remitted by migrants to Kenya. The study also recommends that the government consider expanding exploitation of diaspora bonds and diaspora savings and credit cooperative societies while drawing lessons from other countries' previous attempts.
The paper analyses demand for different monetary aggregates (M0, M1, M2 and M3) in Kenya for the period 1997:4-2011:2. Dynamic frameworks are used to estimate and uncover parsimonious and empirically stable demand for money functions. Price, real GDP, nominal 91-Day Treasury bill rate, nominal interbank rate, nominal deposit rate and foreign interest rate affected the long-run demand for money functions to different degrees. The demand for money functions is found to be unstable over the period for the parameter values, implying that the current monetary targeting policy framework is inappropriate. However, there are challenges in adopting an alternative monetary policy framework.
Purpose -This study aims to quantitatively measure the size and speed of monetary policy interest rate transmission to long-term interest rates in Kenya. Design/methodology/approach -The study uses autoregressive distributed lag specification re-parameterized as an error correction model and mean adjustment lag methods. Findings -The study finds incomplete pass-through of policy rates both in the short and the long run. The study also shows that it takes approximately between 11 months to two years for policy interest rate to be fully transmitted to long-term rates. Originality/value -The study is novel as it is the first attempt the authors are aware of that empirically investigates the interest rate pass-through in Kenya using high-frequency data. Measuring the speed and size of interest rate pass-through provides policy makers with insights on how long it takes for a particular policy action to yield desired results on the real economy. The findings of this study will therefore inform policy makers of the effectiveness of their policy decisions and facilitate timely monetary policy actions.
This study analyzes the dynamics of key climate change indicators and their implications on food prices in Eastern and Southern African Countries. The study uses descriptive and quantitative analysis of monthly data covering ten countries over the period 2001 to 2020. The descriptive analysis reveals that the sampled countries have experienced various climate change events with increasing intensity in the last two decades. Additionally, three of the countries in the sample ranked in the list of countries most affected by extreme weather events in 2019 are at risk of either frequent events or rare but extraordinary catastrophes. The quantitative analysis showed that supply shocks measured using rainfall amounts and imported food price inflation are the main determinants of food inflation, whereas oil prices, subsidies, and imported inflation are the key determinants of overall inflation. At a macro level, the analysis shows that all countries have various climate change policy initiatives in place but are still vulnerable to climate change risks. This implies a need for sector-specific climate change policy options that are most effective. In addition, the adoption of renewable sources of power such as wind and solar and appropriate irrigation practices is important.
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