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Working Paper 108 - Is there a Case for Formal Inflation Targeting in Sub-Saharan Africa?

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  • James Heintz
  • Léonce Ndikumana

Abstract

This paper examines the question of whetherinflation targeting monetary policy is anappropriate framework for sub-SaharanAfrican countries. The paper presents anoverview of inflation targeting, reviews thejustification for the regime, and summarizessome major critiques. Monetary policyresponses to inflation depend on the sourceof inflationary pressures. Therefore, thedeterminants of inflation in African countriesare investigated, using dynamic panel data,and the implications for inflation targetingare discussed. These issues are examined ingreater detail for the two African countrieswhich have formally adopted inflationtargeting, South Africa and Ghana. Theanalysis is placed in the context of the globaleconomic crisis. The paper concludes with adiscussion of alternative approaches tomonetary policies and the institutionalconstraints that would need to be addressedto allow central banks to play a strongerdevelopmental role in sub-Saharan Africancountries.

Suggested Citation

  • James Heintz & Léonce Ndikumana, 2010. "Working Paper 108 - Is there a Case for Formal Inflation Targeting in Sub-Saharan Africa?," Working Paper Series 245, African Development Bank.
    • Handle: RePEc:adb:adbwps:245
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    Cited by:

    1. Léonce Ndikumana & Zuzana Brixiova & Kaouther Abderrahim, 2010. "Working Paper 117 - Supporting Africa's Post-Crisis Growth: The Role of Macroeconomic Policies," Working Paper Series 254, African Development Bank.
    2. Gerson Nhapulo & João Nicolau, 2017. "Assessing Nonlinear Dynamics of Central Bank Reaction Function: The Case of Mozambique," South African Journal of Economics, Economic Society of South Africa, vol. 85(1), pages 28-51, March.
    3. repec:ilo:ilowps:467212 is not listed on IDEAS
    4. Zuzana Brixiová & Léonce Ndikumana, 2011. "Supporting Africa’s Post-Crisis Growth: The Role of Macroeconomic Policies," Working Papers wp254, Political Economy Research Institute, University of Massachusetts at Amherst.
    5. Mr. Arto Kovanen, 2011. "Does Money Matter for Inflation in Ghana?," IMF Working Papers 2011/274, International Monetary Fund.
    6. Ahmet Benlialper & Hasan Cömert, 2016. "Implicit asymmetric exchange rate peg under inflation targeting regimes: the case of Turkey," Cambridge Journal of Economics, Oxford University Press, vol. 40(6), pages 1553-1580.
    7. Valli, Mohammed & Masih, Mansur, 2014. "Is there any causality between inflation and FDI in an ‘inflation targeting’ regime? Evidence from South Africa," MPRA Paper 60246, University Library of Munich, Germany.
    8. Zhandos Ybrayev, 2017. "The Prospect Of Inflation Targeting In Kazakhstan," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 5(1), pages 33-48.
    9. repec:ilo:ilowps:488128 is not listed on IDEAS
    10. Enock Nyorekwa Twinoburyo & Nicholas M Odhiambo, 2018. "Can Monetary Policy drive economic growth? Empirical evidence from Tanzania," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 12(2), June.
    11. Agu, Ugochukwu. & Evoh, Chijioke J., 2011. "Macroeconomic policy for full and productive and decent employment for all : the case of Nigeria," ILO Working Papers 994672123402676, International Labour Organization.
    12. Ndoricimpa Arcade, 2017. "Working Paper 249 - Threshold Effects of Inflation on Economic Growth in Africa: Evidence from a Dynamic Panel Threshold Regression," Working Paper Series 2359, African Development Bank.
    13. Epstein, Gerald., 2015. "Development central banking : a review of issues and experiences," ILO Working Papers 994881283402676, International Labour Organization.
    14. Mwankemwa, Lusajo P. & Mlamka, Bonaventura, 2022. "Effects of Monetary Policy on Bank’s Credit Dynamics in Tanzania," African Journal of Economic Review, African Journal of Economic Review, vol. 10(2), March.
    15. Nana Kwame Akosah & Francis W. Loloh & Maurice Omane-Adjepong, 2018. "Justifying the Adoption and Relevance of Inflation Targeting Framework: A Time-Varying Evidence from Ghana," Papers 1805.11562, arXiv.org.
    16. Oluwatosin Adeniyi & Festus O. Egwaikhide, 2013. "Saving-Investment Nexus In Developing Countries: Does Financial Development Matter?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(2), pages 119-140, June.

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