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Assessment of the Relationship between Central Bank Interest Rate, Inflation and Growth in Central Africa Countries with the New Leading-Lagging Method

Author

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  • Any Flore Djoumessi Djoukouo

    (University of Yaounde II, Yaounde, Cameroon)

  • Knut Lehre Seip

    (Oslo Metropolitan University, Oslo, Norway)

Abstract

This paper assesses the causal relationship between central bank interest rate, inflation and GDP growth in Central African countries using a new leading-lagging method over the period 1990-2019. The results show a short-term relationship between the three variables, with strong evidence of unidirectional non-linear causality running from the interest rate to inflation for the region as a whole. However, analysis by the country reveals some divergences on the causality between variables despite the fact that all six countries benefitted from the central bank monetary policy at one time or another, either with respect to GDP or INF. The empirical implications of these results are the relative independence in central bank decisions and the absence of synchronization between region's economies.

Suggested Citation

  • Any Flore Djoumessi Djoukouo & Knut Lehre Seip, 2025. "Assessment of the Relationship between Central Bank Interest Rate, Inflation and Growth in Central Africa Countries with the New Leading-Lagging Method," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 14(2), pages 169-193.
    • Handle: RePEc:cbk:journl:v:14:y:2025:i:2:p:169-193
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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • F15 - International Economics - - Trade - - - Economic Integration

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