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Pro Growth Monetary Policy in Africa: Monetarist versus Keynesian Approach

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  • NGUENA, Christian L.

Abstract

The relative positive economic growth experienced by most African countries in the recent decade has come with insufficient demand stimulation. The concern of poverty at the forefront of economic policy, the need for inclusive growth and sustainable development, inter alia, brings forward the inevitable question of the monetary policy responsibility. Accordingly, the monetarist theory that focuses on price stability inherently neglects the demand stimulation aspect of economic prosperity. Since the mid 1980s, the monetarist school driven by its central aim of fighting inflation and maintaining credibility in markets and economic agents has been priority for monetary authorities (especially in Africa). To this effect, while good results in terms of inflation targeting has been achieved in many African countries; economic growth has sometimes been low. Hence, in light of the above, using a statistical and theoretical debate method, the Credible Monetary Policy (CMP)i paradox is traceable to Africa. Accordingly, with the promising economic environment in Africa, we recommend the promotion of a monetary policy oriented toward improving economic growth under the constraint of price stability. In light of the above view, there are some note worthy signs such the recent decision by the two CFA zone central banks to either maintain interest rates at a low level or reduce it despite tightening measures of monetary policy taken by the European Central Bank (ECB) earlier in the year. In the same vein, the central bank of South Africa has maintained its policy of low interest rates with an objective of economic expansion. Since, the 2008 financial crisis, the consolidation of the Federal Reserve’s declared final objective of lowering interest rates and making emergency loans is an eloquent example to reassure African central banks in the choice of the pro-growth monetary policy option.

Suggested Citation

  • NGUENA, Christian L., 2012. "Pro Growth Monetary Policy in Africa: Monetarist versus Keynesian Approach," MPRA Paper 49410, University Library of Munich, Germany, revised 31 Aug 2013.
  • Handle: RePEc:pra:mprapa:49410
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    File URL: https://mpra.ub.uni-muenchen.de/49410/1/MPRA_paper_49410.pdf
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    References listed on IDEAS

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    1. Epstein, Gerald A., 2006. "Central Banks as Agents of Economic Development," WIDER Working Paper Series 054, World Institute for Development Economic Research (UNU-WIDER).
    2. Simplice A. Asongu, 2013. "Fighting consumer price inflation in Africa: What do dynamics in money, credit, efficiency and size tell us?," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 5(1), pages 39-60, April.
    3. Simplice A Asongu, 2013. "How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence," Economics Bulletin, AccessEcon, vol. 33(1), pages 663-676.
    4. Simplice A Asongu, 2013. "A Short-run Schumpeterian Trip to Embryonic African Monetary Zones," Economics Bulletin, AccessEcon, vol. 33(1), pages 859-873.
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    Citations

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    Cited by:

    1. Simplice A. Asongu, 2015. "Finance and growth: new evidence from meta-analysis," Managerial Finance, Emerald Group Publishing, vol. 41(6), pages 615-639, June.
    2. Asongu, Simplice & Nguena, Christian, 2014. "Equitable and Sustainable Development of Foreign Land Acquisitions: what have we learnt on policy syndromes and implications?," MPRA Paper 56808, University Library of Munich, Germany.
    3. Christian Lambert Nguena & Roger Tsafack Nanfosso, 2013. "What Drives and Limits Financial Deepening Dynamics? Fresh Empirical-based Policy Lessons for African Sub-Regions," AAYE Policy Research Working Paper Series 13_003, Association of African Young Economists, revised Nov 2013.

    More about this item

    Keywords

    Pro growth monetary policy; Credible Monetary Policy paradox; Financing enterprises; African central bank.;

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • 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

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