Thesis Open Access
ZERAYEHU SIME
{ "DOI": "10.20372/nadre:2936", "author": [ { "family": "ZERAYEHU SIME" } ], "issued": { "date-parts": [ [ 2006, 7, 1 ] ] }, "abstract": "<p>This paper presents a model of monetary policy in Ethiopia after financial liberalization policy adopted. It is<br>\ndesigned to identify both the goals and pattern of policy with the two major aims: firstly to know the way<br>\nhow National Bank of Ethiopia systematically responds to macroeconomic shocks and secondly to evaluate<br>\nthe performance monetary policy against its initial objective including assessment of gap analyses in<br>\nmonetary policy frame work.<br>\nHence, the model demonstrates that the National Bank of Ethiopia chooses the domestic credit as the most<br>\nappropriates indicator of monetary policy with the determinants of net foreign assets, consumer price index,<br>\nfiscal gap, real effective exchange rate and Gross Domestic Products to formulate the reaction function. On<br>\ntop of this the empirical results explain that domestic credit has strong long run & positive relation with net<br>\nforeign assets & to real Gross Domestic Product. But it has short run relation with consumer price index,<br>\nreal effective exchange rate and real Gross Domestic Product at different lag structure. The NBE followed a<br>\ncombination of both accommodating and stabilization monetary policy. The Coefficients of equilibrating<br>\nerror terms, ECM suggest that the speed of adjustment/ feed back effect towards the long run equilibrium<br>\ntakes many years for full adjustment when there is a shock in the system, indicating the longer lags structure<br>\nand undeveloped financial sectors resulted in obstacles for the effectiveness of monetary policy</p>", "title": "HOW CENTRAL BANK RESPONDS TO MACROECONOMIC SHOCKS? SPECIFICATION, ESTIMATION AND ANALYSIS OF MONETARY POLICY REACTION FUNCTION: THE CASE OF ETHIOPIA (1991-2005)", "type": "thesis", "id": "2936" }
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