Inflation Targeting and Its Effect on Food Price Volatility in Kenya
| dc.contributor.author | Wambui, Fredrick Meni | |
| dc.date.accessioned | 2024-08-01T07:58:25Z | |
| dc.date.available | 2024-08-01T07:58:25Z | |
| dc.date.issued | 2024-07 | |
| dc.description | A Research Project Submitted to the Department of Economic Theory in the School of Business, Economics and Tourism in Partial Fulfilment of the Requirements for the Award of the Degree of Master of Economics (Policy and Management) of Kenyatta University July, 2024 Supervisor Isaac Kimunio | |
| dc.description.abstract | Inflation targeting was adopted by the Central Bank of Kenya in 2011 to control inflation and ensure price stability. Despite this strategy, Kenya persistently experiences volatile food prices, presenting substantial socioeconomic challenges. High and unpredictable food prices predominantly affect low-income households that allocate a significant fraction of their earnings on food. The study aims to add to the literature gap by investigating the efficacy of inflation targeting in stabilizing food prices within Kenya. Even though the Central Bank has met its inflation objectives over the past decade, it has found it challenging to mitigate recurring food price shocks due to various factors, including global commodity prices, exchange rate dynamics, climatic changes, and regional disputes. The research specifically delves into three primary objectives: assessing the contribution of food prices to Kenya's overall inflation, scrutinizing the influence of global food prices on domestic prices, and examining the impact of inflation targeting on food inflation. The research leverages secondary time series data from 2011-2022 sourced from Central Bank of Kenya, Kenya National Bureau of Statistics , and Food and Agricultural Organisation reports, encompassing parameters like the Consumer Price Index, exchange rates, food prices, and broader macroeconomic variables. This investigation employs a multivariate linear regression model in the STATA software. The findings reveal that inflation targeting, while meeting overall inflation objectives, has been less effective in curbing the volatility of food prices. The study suggests that to ensure food price stability, a broader approach incorporating additional policies is necessary. The findings of this study offer insights into supplementary policies required to safeguard food price stability in Kenya, highlighting the need to venture beyond mere monetary policies. The significance of this investigation is manifold. For policymakers, especially within the Central Bank of Kenya, it offers nuanced insights that can guide monetary and fiscal policies, acknowledging the layered complexity of food price dynamics. As volatility in food prices can reverberate through the socio-economic fabric of Kenya, affecting food security, farmers' incomes, and the general populace's welfare, these findings provide a roadmap for harmonizing strategies across monetary, fiscal, and trade domains. Investors and the business sector too can benefit, using the gleaned knowledge to navigate the labyrinth of food price instability and making sagacious financial choices. Furthermore, this study underscores the imperative of empirical analyses in emerging economies, which can act as touchstones for sculpting policies that aim at poverty mitigation and sustainable development. | |
| dc.description.sponsorship | Kenyatta University | |
| dc.identifier.uri | https://ir-library.ku.ac.ke/handle/123456789/28543 | |
| dc.language.iso | en | |
| dc.publisher | Kenyatta University | |
| dc.title | Inflation Targeting and Its Effect on Food Price Volatility in Kenya | |
| dc.type | Thesis |