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Reactions to Shocks and Monetary Policy Regimes: Inflation Targeting Versus Flexible Currency Board in Sub-Saharan Africa

Fadia Al Hajj 1 Gilles Dufrénot 2, 3, 1 Kimiko Sugimoto 4 Romain Wolf
1 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille
2 Centre de recherche de la Banque de France
3 CEPII - Centre d'Etudes Prospectives et d'Informations Internationales
4 大阪学院大学
Abstract : The paper examines the monetary policy actions through which central banks in sub-Saharan Africa have tried to eliminate the negative impacts of the shocks facing their economies. We compare two different monetary policy regimes: a currency board regime (in the CFA zone) and an inflation targeting policy regime (Ghana and South Africa) when central banks respond to demand, supply, and fiscal shocks. We extend the usual forecasting and policy analysis system models to replicate the economic features of these economies during the period 2002–12 and to evaluate the impact of several policies in response to these shocks. We find that both policies are inappropriate in helping the economies escape from the effects of negative demand shocks, both are essential when negative shocks to primary balance occur, while inflation targeting dominates the currency board regime as a strategy to cope with positive shocks to inflation.
Keywords : African countries Currency board E52 F41 Inflation target Q33
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https://hal-amu.archives-ouvertes.fr/hal-01457315
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Submitted on : Monday, February 6, 2017 - 1:50:55 PM
Last modification on : Wednesday, August 5, 2020 - 3:18:07 AM

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UNIV-AMU | GREQAM | CNRS | EHESS | EC-MARSEILLE | AMSE | PSL

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Fadia Al Hajj, Gilles Dufrénot, Kimiko Sugimoto, Romain Wolf. Reactions to Shocks and Monetary Policy Regimes: Inflation Targeting Versus Flexible Currency Board in Sub-Saharan Africa. The Developing Economies, 2015, 53 (4), pp.237--271. ⟨10.1111/deve.12088⟩. ⟨hal-01457315⟩

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