Introducing a Semi-Structural Macroeconomic Model for Rwanda

38 Pages Posted: 10 Sep 2014

See all articles by Luisa Charry

Luisa Charry

International Monetary Fund (IMF)

Pranav Gupta

International Monetary Fund (IMF)

Vimal Thakoor

International Monetary Fund (IMF)

Date Written: August 2014

Abstract

We develop a simple semistructural model for the Rwandan economy to better understand the monetary policy transmission mechanism. A key feature of the model is the introduction of a modified uncovered interest parity condition to capture key structural features of Rwanda’s economy and policy framework, such as the limited degree of capital mobility. A filtration of the observed data through the model allows us to illustrate the contribution of various factors to inflation dynamics and its deviations from the inflation target. Our results, consistent with evidence for other countries in the region, suggest that food and oil prices as well as the exchange rate have accounted for the bulk of inflation dynamics in Rwanda.

Keywords: Monetary transmission mechanism, Rwanda, Inflation targeting, Monetary policy, Economic models, Monetary Transmission Mechanisms, Low Income Countries, inflation, real interest rate, aggregate demand, monetary fund, inflation dynamics, monetary transmission, monetary conditions, inflationary pressures, inflation equation, inflation target, central bank, monetary policy rule, inflation rate, monetary aggregates, monetary policy transmission mechanism, reserve requirements, national bank, coefficient on inflation, nominal interest rate, rational expectations, monetary policy regime, inflation rates, monetary policy decisions, inflation objective, monetary policy implementation, foreign exchang

JEL Classification: E47, E52, O23

Suggested Citation

Charry, Luisa and Gupta, Pranav and Thakoor, Vimal, Introducing a Semi-Structural Macroeconomic Model for Rwanda (August 2014). IMF Working Paper No. 14/159, Available at SSRN: https://ssrn.com/abstract=2494328

Luisa Charry (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Pranav Gupta

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Vimal Thakoor

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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