Evolution of Monetary Policy Transmission Mechanism in Malawi: A TVP-VAR Approach

Chance Mwabutwa (), Manoel Bittencourt () and Nicola Viegi
Additional contact information
Chance Mwabutwa: Department of Economics, University of Pretoria

No 201327, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper investigates the evolution of monetary transmission mechanism in Malawi between 1981 and 2010 using a time varying parameter vector autoregressive (TVP-VAR) model with stochastic volatility. We evaluate how the responses of real output and general price level to bank rate, exchange rate and credit shocks changed over time since Malawi adopted financial reforms in 1980s. The paper finds that inflation, real output and exchange rate responses to monetary policy shocks changed over the period under review. Importantly, beginning mid-2000, the monetary policy transmission performed consistently with predictions of economic theory and there is no evidence of price puzzle as found in the previous literature on Malawi. However, the statistical significance of the private credit supply remains weak and this calls for more financial reforms targeting the credit market which can contribute to monetary transmission and promote further economic growth in Malawi.

Keywords: Monetary Policy Transmission Mechanism; Price Puzzle; Financial Reforms; Bayesian TVP-VAR (search for similar items in EconPapers)
JEL-codes: C49 D12 D91 E21 E44 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2013-06
New Economics Papers: this item is included in nep-afr, nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.up.ac.za/media/shared/61/WP/wp_2013_27.zp39421.pdf (application/pdf)

Related works:
Journal Article: EVOLUTION OF MONETARY POLICY TRANSMISSION MECHANISM IN MALAWI: A TVP-VAR APPROACH (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201327

Access Statistics for this paper

More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rangan Gupta ().