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Fiscal Dominance in Sub-Saharan Africa Revisited

Author

Listed:
  • Lam Nguyen
  • Mika Saito
  • Shirin Nikaein Towfighian

Abstract

This paper explores the causes and consequences of fiscal dominance over monetary policy in Sub-Saharan Africa (SSA). Fiscal dominance has always been a pressing problem as it can contribute to inflation and macroeconomic instability, and increasingly so as fiscal deficits and public debt are rising in many SSA countries. We find that legal limits and availability of alternative financing options play an important role in determining the extent to which government deficits tend to be financed by the central bank. We also find economically significant effects of central bank lending to government on the exchange rate and inflation.

Suggested Citation

  • Lam Nguyen & Mika Saito & Shirin Nikaein Towfighian, 2021. "Fiscal Dominance in Sub-Saharan Africa Revisited," IMF Working Papers 2021/017, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2021/017
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    Cited by:

    1. Achua, Joseph Kwaghkor & Yusuf, Mariam & Wakdok, Samuel Stephen, 2022. "Nonlinear public debt and resource rent nexus in highly indebted resource-rich sub-Saharan economies: Evidence from Nigeria," Resources Policy, Elsevier, vol. 79(C).
    2. Kovács, Olivér, 2022. "Könnyelmű verdikt az államadósság fölött. Eichengreen, B.-El-Ganainy, A.-Esteves, R.-Mitchener, K. J.: In Defense of Public Debt. Oxford University Press, 313 o [A frivolous verdict on public debt.," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 413-418.

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