How can developing countries design a macroeconomic policy framework that will reverse the current trend of persistent inflation, regressive real growth and foreign exchange bottlenecks? One plausible answer emerges from an intersection between the dilemma and a novel analytical approach. In this book, Victor Murinde develops one novel approach by drawing on the first principles of economic theory to construct a macroeconomic model such that the structural features and bottlenecks of a developing country are integrally incorporated. The model is small and congruent with the limited available data, but it is comprehensive enough to address the key policy instruments and targets. A battery of modern econometric techniques are called upon to estimate and test the model on Kenya, Tanzania and Uganda, since independence, in a country-specific as well as cross-country spirit. Policy experiments are performed to highlight the macroeconomic scenario generated each time a policy instrument or a stabilization policy package is implemented. The experiments fully demonstrate the practicability of the 'small-model-limited-data' methodology developed in the book.The economics behind the relative slopes of the AD and BB curves is similar to the case under flexible exchange rates. ... To restore equilibrium in the goods market, lower prices are needed to increase the supply of money as well as toanbsp;...
|Title||:||Macroeconomic policy modelling for developing countries|