|
MONETARY POLICY STRATEGY IN RWANDA
By
Serge Musana Mukunzi
Supervisor: Nicola Viegi
Submitted in partial fulfillment of the requirements for the
Master's degree of commerce (Economics).
University of Kwazulu-Natal,
Durban, 2004
DECLARATION
I declare that this is my own work, except where acknowledged
in the text, and has been submitted or a degree at any other university.
.....................................................
TABLE OF CONTENTS
DECLARATION.....................................................................................i
TABLE OF
CONTENTS...........................................................................ii
LISTE OF
TABLES.................................................................................iv
LISTE OF
FIGURES................................................................................v
DEDICATION.......................................................................................vi
AKNOWLEDGEMENTS.........................................................................vii
ABSTRACT........................................................................................viii
Chapter 1:
INTRODUCTION.....................................................................
1
Chapter 2: THEORETHICAL FOUNDATION OF MONETARY
POLICY...............5
2.1: Objective of monetary
policy.................................................................5
2.2: The instruments of monetary
policy.........................................................7
2.3: Monetary policy
strategies.......................................................
............10
2.3.1: Choosing and using a
target............................................................... 11
2.3.2: Monetary policy
rules......................................................................
12
2.3.2.1: Exchange rate
rule........................................................................13
2.3.2.2: Money supply
rule........................................................................14
2.3.2.3: Nominal GDP target
rule.................................................................16
2.3.2.4: Inflation targeting
rule....................................................................18
2.3.2.5: Taylor
rule.................................................................................21
Chapter 3: MONETARY POLICY IN
RWANDA.............................................23
3.1: Macroeconomic
background.................................................................23
3.2: Monetary and exchange rate policy
management.........................................25
3.2.1: Monetary
policy.............................................................................26
3.2.2: Exchange rate
policy........................................................................29
Chapter 4: ILLUSTRATION OF MONETARY STRATEGY
BY MEANS OF
MODEL.........................................................................31
4.1: Empirical
analysis.............................................................................34
4.1.1: Reaction function for
Rwanda.............................................................34
4.1.2:
Methodology..................................................................................36
4.1.2.1:
Data...........................................................................................36
4.1.2.2 Time series properties of the
data........................................................37
4.2: Estimation
results..............................................................................40
Chapter5: CONCLUSION AND
SUGGESTION.........................................................................47
BIBLIOGRAPHY..................................................................................49
APPENDIX..........................................................................................54
LISTE OF TABLES
Table 3.1: Inflation objective and
Inflation observed in
percentage...................................................................................27
Table 3.2 Monetary stock aggregate(M2) Net External Asset
(NEA) and
Net Interior Asset (NIA)In
percentage.........................................................29
Table 4.1 Unit root test-levels of
variables................................................... 38
Table 4.2 Unit root tests of the first
difference............................................... 38
Table 4.3 Ordinary Least squares
estimation of equation
4................................................ .........................40
Table 4.4 Ordinary Least squares
Estimation of equation
5.........................................................................42
LISTE OF FIGURES
Figure 3.1: Annual growth of monetary stock aggregate
M2 and
inflation:1997-2002............................................................................28
DEDICATION
This dissertation is dedicated to the Musana family.
ACKNOWLEDGEMENT
My thanks goes to my academic supervisor Dr Nicola Viegi for
his guidance, inspiration, comments and criticism which inspired many ideas and
produced some very satisfying solutions.
I have profound gratitude to Professor Rwigamba Balinda, the
Rector of Kigali Independent University, for sponsoring my post graduate
studies at the University of Kwazulu-Natal.
Thanks goes to my friends and colleagues in the economic
department for making my student life enjoyable.
Thanks also goes to my family and all friends for their
encouragement and support which they have given me during my studies.
Last but not least, special thanks goes to my Lord Jesus
Christ for all the Blessings, which, I enjoy in this life.
| 
