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How effective are countercyclical policy tools in mitigating the impact of financial and economic crises in Africa?

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  • Bandara, Amarakoon

Abstract

Using panel vector auto regression (PVAR) and GMM estimates we provide evidence for the transmission of financial crises to African economies through foreign direct investments and exports. Although many countries resort to stimulus packages to mitigate the impacts of financial crises, we find no evidence for fiscal policy to be considered an effective countercyclical policy tool in the African context. Monetary policy could be an effective tool in mitigating the impact in non-resource rich SSA countries, but not in others. Limited policy space calls for African economies to reconsider their policies towards trade, investment, finance and macroeconomic management.

Suggested Citation

  • Bandara, Amarakoon, 2014. "How effective are countercyclical policy tools in mitigating the impact of financial and economic crises in Africa?," Journal of Policy Modeling, Elsevier, vol. 36(5), pages 840-854.
  • Handle: RePEc:eee:jpolmo:v:36:y:2014:i:5:p:840-854
    DOI: 10.1016/j.jpolmod.2014.08.003
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    1. repec:eee:jpolmo:v:40:y:2018:i:1:p:118-135 is not listed on IDEAS

    More about this item

    Keywords

    Financial crisis; Transmission; Fiscal stimulus; Monetary policy;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E53 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Deposit Insurance
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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