The Determinants of Interest Rates in Kuwait: An Empirical Investigation

Authors

  • Mohammad A. Alomar Kuwait University
  • Reyadh Y. Faras Kuwait University
  • Khalifa H. Ghali Kuwait University

DOI:

https://doi.org/10.34120/ajas.v13i3.635

Keywords:

Monetary Policy, Money Supply, Interest Rate, Stock Market Index, Real Estate Index, Federal Funds Rate

Abstract

The objective of this paper is to empirically investigate the determinants of interest rates which represent the main monetary policy tool of the central bank in Kuwait. The aim is to provide a clear understanding of how a reaction function can fit the need of monetary policy in an oil-producing country like Kuwait where a significant part of inflation is uncontrollable. Both the short- and long-run behavior of interest rates are investigated using the cointegration and Granger-causality methodology. The results show that, money supply, the exchange rate, oil prices, real and financial asset prices, are significant determinants of the interest rate.

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Author Biographies

Mohammad A. Alomar, Kuwait University

Ph.D. in Economics; Claremont Graduate University, California, 2002. Currently an Assistant Professor at the Department of Economics, College of Business Administration, Kuwait University. His research areas and interests are; Monetary Theory, International Trade, World Trade Organization, Public Choice and Political Economy, and Public Finance.

Reyadh Y. Faras, Kuwait University

Ph.D. in Economics, West Virginia University, USA, 2002. Assistant Professor, Department of Economics, College of Business Administration, Kuwait University, Kuwait. Areas of interest: Public Finance, International Trade, Welfare Economics, and Monetary Theory.

Khalifa H. Ghali, Kuwait University

Ph.D., Economics University of Southern California, U.S.A. 1991. Associate Professor, Department of Economics, Kuwait University, also Professor of Economics at the University of Tunis. His major research interests focus on Applied Economic Growth and Development, and Macroeconomic Dynamics.

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Published

2006

How to Cite

Alomar, M. A., Faras, R. Y., & Ghali, K. H. (2006). The Determinants of Interest Rates in Kuwait: An Empirical Investigation. Arab Journal of Administrative Sciences, 13(3), 385–400. https://doi.org/10.34120/ajas.v13i3.635

Issue

Vol. 13 No. 3 (2006)

Section

Economics