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MONETARY POLICY IN RWANDA: A COINTEGRATION ANALYSIS
Author(s) -
Sayinzoga Aüssi,
Simson Richard
Publication year - 2006
Publication title -
south african journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.502
H-Index - 31
eISSN - 1813-6982
pISSN - 0038-2280
DOI - 10.1111/j.1813-6982.2006.00049.x
Subject(s) - monetary policy , economics , disequilibrium , cointegration , inflation targeting , inflation (cosmology) , monetary economics , macroeconomics , international economics , medicine , physics , theoretical physics , econometrics , ophthalmology
Abstract Countries in Africa are increasingly becoming similar in outlook, especially as regards monetary policy. With a view to conducting a long‐term study of monetary policy in Africa, we apply an empirical test for the coherence of inflation targeting, first conducted by Nell (2003) for South Africa, to data from Rwanda. We find that like South Africa, Rwanda has a stable money demand function and the adoption of an inflation target is a wise policy option. Also, the Rwandan money market needs just over five quarters to eliminate half of any monetary disequilibrium. These results are of some interest to economists and policy makers for all the countries in the increasingly interconnected continent of Africa.