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Does Financial Development Explain the Cyclicality of Monetary Policy in Sub-saharan Africa?

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  • Itchoko Motande Mondjeli Mwa Ndjokou and Christophe Martial Mbassi

    (University of Yaounde II)

Abstract

This paper evaluates the influence of financial development on the cyclicality of monetary policy in a sample of 22 Sub Saharan African countries. We use a GMM model to estimate an equation of monetary policy stance based on Taylor¡¯s rule over the period 1984-2012. We obtain the following results. Monetary policy is pro-cyclical in Sub Saharan African countries. Central Banks implement counter-cyclical monetary policy when the country exhibits high level of financial development and pro-cyclical monetary policy in the presence of low level of financial development. The threshold level at which monetary policy is a-cyclical lies between 15% and 18%.

Suggested Citation

  • Itchoko Motande Mondjeli Mwa Ndjokou and Christophe Martial Mbassi, 2018. "Does Financial Development Explain the Cyclicality of Monetary Policy in Sub-saharan Africa?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 43(4), pages 71-84, December.
  • Handle: RePEc:jed:journl:v:43:y:2018:i:4:p:71-84
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    More about this item

    Keywords

    Policy; Business-cycle; Financial Development; GMM;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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