Investigation of optimal inflation targets for 15 major oil exporting Sub-Saharan African countries: A panel threshold estimation

Idris Abdullahi (), Soo Chua and Saidatulakmal Mohd
Additional contact information
Idris Abdullahi: Federal University Dutse, Dutse, Nigeria
Soo Chua: Universiti Sains Malaysia
Saidatulakmal Mohd: Universiti Sains Malaysia

Journal of Economics, Finance and Administrative Science, 2020, vol. 25, issue 49, 45-60

Abstract: Purpose – The purpose of this paper is to investigate the optimal inflation targets for an appropriate exchange rate policy in 15 major oil exporting countries in Sub-Saharan African (SSA). Design/methodology/approach – Dynamic heterogeneous panel threshold techniques are used via threshold-effect test and threshold regression. This procedure is achieved through a grid search and bootstrapping replications method to stimulate the asymptotic distribution of the likelihood ratio test of the null hypothesis on no-threshold as against the alternative hypothesis. The p-values validate the threshold estimates. Findings – Findings revealed that the optimal inflation target has a turning point and its impact on the real exchange rate is up to a threshold level of 14.47 per cent. Furthermore, the inflation rate above the threshold level overwhelmingly revealed its effect on real exchange regimes. Practical implications – Inflation targeting beyond the threshold level would have serious implications on the monetary policy. Originality/value – To the best of the knowledge, this is the first study to look at optimal inflation targets for 15 major oil exporting countries in general and SSA countries in particular. The findings provide a critical analysis of an inflation regime for a typical oil-producing country that oil exports being their source of revenue.

Keywords: Panel threshold; Real exchange rate; Leverage; Optimal inflation; Sub-Saharan Africa; Dynamic heterogenous panel threshold regression; Optimal inflation targeting; Real exchange rates (search for similar items in EconPapers)
JEL-codes: C24 E31 E52 E61 F42 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... threshold-estimation Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:joefas:0156

Access Statistics for this article

Journal of Economics, Finance and Administrative Science is currently edited by Nestor U. Salcedo

More articles in Journal of Economics, Finance and Administrative Science from Universidad ESAN 1652 Alonso de Molina, Santiago de Surco 15023, Lima, Peru. Contact information at EDIRC.
Bibliographic data for series maintained by ESAN Ediciones ().