Effectiveness of monetary policy on inflation targeting in Kenya

Abstract

This study evaluates the feasibility of inflation targeting in Kenya by analyzing the effectiveness of monetary policy instruments in inflation targeting. The study uses a VAR analysis approach to assess the importance of the relationship between the monetary policy variables and inflation . Results show that the linkages between monetary policy instruments and inflation are not quite strong. Therefore Kenya ought to improve its monetary policy system in order to incorporate a fully-fledged inflation targeting framework within the economy.