Macroeconomic imbalances evolution and their effect on bank intermediation cost in Kenya

David Ndwiga and Geraldine Makunda

No 93, KBA Centre for Research on Financial Markets and Policy Working Paper Series from Kenya Bankers Association (KBA)

Abstract: The study investigates the effects of macro imbalances on the banking sector performance in Kenya from the financial intermediation cost perspective for 2020q4 - 2024q1 period. Employing dynamic panel GMM model, the study finds that inflation pressures above the upper bound target, external debt unsustainability, monetary policy tightening and current account deficit to GDP ratio lead to increase in the intermediation cost. The findings call for need to anchor the inflation rate below the upper bound target, exercise prudence fiscal measures, effective application of the monetary policy instruments and development of a matrix of interlinkages between the macro imbalances.

Date: 2025
New Economics Papers: this item is included in nep-cba, nep-fdg and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kbawps:316419

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