Effect of Central Bank independence on inflation in Kenya
Gitahi, Jane Wangui
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Kenya suffered double digit inflation rates as from 1974 culminating in the highest ever recorded rate of 46 per cent in 1993. High inflation brings with it uncertainties that retard economic growth. As such it is of paramount importance for a country to put in place mechanisms to maintain low and stable inflation rates. Among the solutions to high inflation rates is conferring independence upon the central bank. This study will examine the effect of the independence of the Central Bank of Kenya on inflation in Kenya. Empirical literature on the relationship between central bank independence and inflation is controversial with some studies showing a strong negative relationship while others find a weak relationship or none at all. The study will adopt a regressional research design. Secondary data on annual inflation rates, budget deficit, imports, exports and the level of the Gross Domestic Product in Kenya from 1966 to 2012 will be used.