Browsing by Author "Muluvi, A.S"

Now showing 1 - 1 of 1
  • No Thumbnail Available
    Item
    The impact of money supply on inflation in Kenya: an empirical investigation for the period 1972-1993
    (University of Dar es Salaam, 1995) Muluvi, A.S
    Kenya experienced low inflation rates between the period 1963-1973, after which, the situation changed markedly and inflation hit double digit figures. This continued for the most part of the 1980's with the situation worsening further in 1990's whereby inflation rate almost reached a three digit figure. By June 1993, the 3-month annualised inflation rate was recorded at 101.06 percent, hence marking the highest level ever reached in the country's price history. In view of the above, this study has looked at the main cause of inflation in Kenya. The study is based on the monetarist perception that inflation is everywhere and at all times a monetary phenomenon. For there to be inflation, increase in money supply is both a necessary and sufficient condition. Using time series data and a single equation model, the study tests the relationship between inflation and monetary expansion in the country. The estimated model tends to agree with the hypothesis that inflation in Kenya is a monetary phenomenon. However, other factors like imported inflation are found to have a significant impact on the inflationary situation in the country. On the policy front, the study suggests a strict monetary policy with an aim of containing inflation. Since increased money supply results from both government and private sector borrowing, and credit creation, more emphasis is put on how to control these factors with a view of controlling money supply.