Monetary Policy Transmission Mechanism in Namibia: A Bayesian VAR Approach

  • Johannes PS Sheefeni Department of Economics, University of Namibia
DOI: https://doi.org/10.22610/jebs.v9i5(J).1921
Keywords: central bank, monetary policy, Bayesian VAR, Namibia

Abstract

This study analyzed the interest rate channel, credit channel, exchange rate channel and asset price channel for monetary policy transmission mechanism in Namibia. The idea behind this study is to have a comprehensive study that covers a variety of channels for monetary policy transmission mechanism. The study utilized a Bayesian vector autoregression (BVAR) technique on quarterly time-series data covering the period 2000:Q1 to 2016:Q4. In particular, the validity of the data used is checked and verified by using two sets of prior distributions suggested by Sims and Zha as well as prior distribution of Koop and Korobilis. The variables used in this study are real output (Yt), real effective exchange rate (Et), inflation rate (P t), repo rate (Rt), housing price index (Ht) and credit extended to private sector (Lt). The findings revealed that interest rate and credit channels remain important in the transmission mechanism to this day. Notably the exchange rate and asset price channels are also slowly gaining prominence in monetary policy transmission mechanism. Therefore, the study provides useful information to the monetary authorities regarding the process of transmission mechanisms. This is quite important especially that the Central Bank (Bank of Namibia) is very serious about financial stability within the financial system, given the fragility of the financial systems in the world due to financial crisis.   

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References

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Published
2017-10-21
How to Cite
Sheefeni, J. P. (2017). Monetary Policy Transmission Mechanism in Namibia: A Bayesian VAR Approach. Journal of Economics and Behavioral Studies, 9(5(J), 169-184. https://doi.org/10.22610/jebs.v9i5(J).1921
Issue
Vol 9 No 5(J) (2017)
Section
Research Paper

Copyright (c) 2017 Johannes PS Sheefeni

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