Various studies have reflected the existence of a positive relationship between the increase of money supply and the level of inflation. Generally, this is reflected by the continued rise of prices of the various products. A situation ensues where excess amounts of money tend to be chasing too few goods. In this perspective, this study tested on whether monetary policy is an effective tool in the combating of inflation. The data utilized was derived from Kenya’s economic situations over a range of years. The period in perspective was that between the years 2001 and 2010. During this period, Kenya faced various catastrophic economic events. Some instances of political instabilities, depressions, and economic recessions were vividly witnessed. In addition, the level of inflation was at an all-time high. During this duration, various monetary policies and tools were utilized by the Central Bank of Kenya. As such, this range was most suitable for this research. The research used ordinary least square model (regression model) in the endeavor. The research found out the money supply has a direct impact on the level of inflation. Statistically, money supply has a statistical significance on the level of inflation in the country. Thus, monetary policies aimed at controlling the amount of money supply in the economy, have a tremendous impact on controlling the level of inflation.
M - MONEY SUPPLY
P - PRICE
USD - UNITED STATES DOLLAR
T - TRANSACTIONS
CBK -CENTRAL BANK OF KENYA
GDP - GROSS DOMESTIC PRODUCT
IT - INFLATION TARGETTING
V -VELOCITY OF CIRCULATION
BOP -BALANCE OF PAYMENTS
CPI -CONSUMER PRICE INDEX
1.0 CHAPTER I
1.2 Background Analysis
1.2.1 Monetary Policy Instruments
126.96.36.199 Interest rate policy
188.8.131.52 Minimum liquidity asset ration
184.108.40.206 Open Market Operations
220.127.116.11 Selective Credit Control
18.104.22.168 Inflation Targeting
1.2.2 Failure of Monetary Policy in Developing Countries
1.3 Problem Statement
1.5 Research Questions
1.6 Objectives of the Study
1.7 Significance of the Study
2.0 Literature Review
2.1.1 The Classical Quantity Theory of Money
2.1.2 Keynesian theory
2.1.3 The Monetarist Policy Theory
2.3 Specific Literature
2.2 General Literature
3.0 CHAPTER III: Research Methodology
3.2 Research Design
3.3 Model Specifications
3.4 Definition and Measurement of Variables
3.5 Study Area
3.6 Ethical Consideration
3.7 Target Population
3.8 Data type and source
3.9 Data collection
3.10 Data cleaning, coding, editing, refining and inputting
22 3.11 Data analysis
CHAPTER IV: DATA ANALYSIS AND PRESENTATION
4.1 Descriptive Statistics
4.2 Substantive Objectives
4.2.1 To establish the relationship between money supply and inflation.
29 4.2.2 To find out the effectiveness of monetary policy in combating inflation.
30 4.3 Data Analysis and Interpretation
CHAPTER V: SUMMARY AND RECOMMENDATIONS
5.4 Further Research
APPENDIX A: Data Capture Template
1.0 CHAPTER I
Since time immemorial, inflation has always been an issue of extreme sensitivity. This accrues to the fact that a case of inflation has overall effect on the prices of commodities. An instance of spiraling, uncontrollable inflation is usually a sign of impending catastrophic doom. Thus, the control of monetary policy has turned out to be an essential function of all governments in the world. Inflation does not necessarily have to be reflected a continued increase in the prices of commodities (hyperinflation), the vice versa can also be a reflection of inflation (deflation). However, both situations are more than unhealthy for the economy. In most economic situations,...
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APPENDIX A: Data Capture Template
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