EVOLUTION OF MONETARY POLICY TRANSMISSION MECHANISM IN MALAWI: A TVP-VAR APPROACH

This paper investigates the evolution of monetary transmission mechanism in Malawi between 1981 and 2010 using a time varying parameter vector autoregressive (TVP-VAR) model with stochastic volatility. We evaluate how the responses of real output and general price level to bank rate, exchange rate and credit shocks have changed over timesince Malawi adopted financial reforms in 1980s. The paper finds that inflation, real output and exchange rate...