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Is There a Case for Formal Inflation Targeting in Sub-Saharan Africa?

Author

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  • James Heintz
  • Léonce Ndikumana

Abstract

This working paper examines the question of whether inflation targeting monetary policy is an appropriate framework for sub-Saharan African countries. The paper presents an overview of inflation targeting, reviews the justification for the regime, and summarizes some major critiques. Monetary policy responses to inflation depend on the source of inflationary pressures. Therefore, the determinants of inflation in African countries areinvestigated, using dynamic panel data, and the implications for inflation targeting are discussed. These issues are examined in greater detail for the two African countries which have formally adopted inflation targeting, South Africa and Ghana. The analysis is placed in the context of the global economic crisis. The paper concludes with a discussion of alternative approaches to monetary policies and the institutional constraints that would need to be addressed to allow central banks to play a stronger developmental role in sub-Saharan African countries.

Suggested Citation

  • James Heintz & Léonce Ndikumana, 2010. "Is There a Case for Formal Inflation Targeting in Sub-Saharan Africa?," Working Papers wp218, Political Economy Research Institute, University of Massachusetts at Amherst.
  • Handle: RePEc:uma:periwp:wp218
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    File URL: https://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_201-250/WP218.pdf
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Oluwatosin Adeniyi & Festus O. Egwaikhide, 2013. "Saving-Investment Nexus In Developing Countries: Does Financial Development Matter?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(2), pages 119-140, June.
    2. repec:bla:sajeco:v:85:y:2017:i:1:p:28-51 is not listed on IDEAS
    3. Senbeta, Sisay, 2011. "How applicable are the new keynesian DSGE models to a typical low-income economy?," MPRA Paper 30931, University Library of Munich, Germany.
    4. repec:ilo:ilowps:488128 is not listed on IDEAS
    5. Zuzana Brixiová & Léonce Ndikumana, 2011. "Supporting Africa’s Post-Crisis Growth: The Role of Macroeconomic Policies," Working Papers wp254, Political Economy Research Institute, University of Massachusetts at Amherst.
    6. Nyorekwa, Enock Twinoburyo & Odhiambo, Nicholas Mbaya, 2016. "Can monetary policy drive economic growth? Empirical evidence from Tanzania," Working Papers 21122, University of South Africa, Department of Economics.
    7. Roseline Nyakerario Misati & Esman Morekwa Nyamongo & Lucas Kamau Njoroge & Sheila Kaminchia, 2012. "Feasibility of inflation targeting in an emerging market: evidence from Kenya," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 4(2), pages 146-159, May.
    8. Epstein, Gerald., 2015. "Development central banking : a review of issues and experiences," ILO Working Papers 994881283402676, International Labour Organization.

    More about this item

    Keywords

    Sub-Saharan Africa; inflation; development; monetary policy; finance;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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