Covid-19 and the monetary-fiscal policy nexus in Africa

Christopher Adam, Enrique Alberola and Albert Pierres Tejada

No 121 in BIS Papers from Bank for International Settlements

Abstract: The Covid-19 pandemic reinforced the already close interactions between monetary and fiscal policies in Africa. Policymakers provided support to their economies in a coordinated way. Both policies were countercyclical and complementary. Central banks reacted more forcefully than fiscal authorities, as high debt constrained the fiscal response. The tighter fiscal-monetary policy nexus – while effective in facing the pandemic shock – presents risks for the future. The worsening fiscal situation represents a major challenge, not least for central banks. Against a backdrop of inflationary pressures and subdued recovery, political pressures could weigh on the management of monetary policy and generate tensions between policymakers. For central banks, reasserting the paramount importance of the goal of price stability is essential in order to reaffirm solid boundaries between fiscal and monetary policy, and to fend off fiscal dominance risks.

Date: 2022 Written 2022-02
ISBN: 978-92-9259-539-5
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Citations: View citations in EconPapers (1)

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