The Monetary Transmission Mechanism in the Tropics: a Case Study Approach

Many central banks in low-income countries in Sub-Saharan Africa are modernising their monetary policy frameworks. Standard statistical procedures have had limited success in identifying the channels of monetary transmission in such countries. Here we take a case study approach and centre on a significant tightening of monetary policy that took place in 2011 in four members of the East African Community: Kenya, Uganda, Tanzania and Rwanda. We find evidence of the transmission mechanism in most of the countries. Variations across countries can be explained mainly by differences in the policy regime.