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

James Heintz and Leonce Ndikumana

Working Papers from Political Economy Research Institute, University of Massachusetts at Amherst

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.

Keywords: Sub-Saharan Africa; inflation; development; monetary policy; finance (search for similar items in EconPapers)
JEL-codes: E31 E52 O11 O55 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-afr, nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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