Institutions for Macroeconomic Stability in Africa
Journal of African Economies, 1999, vol. 8, issue 0, 6-29
Before discussing the type of institutions that can be designed for overcoming the credibility problem raised by monetary policy, this paper defines macroeconomic instability, showing that inflation is a crucial factor. The relationships between inflation and macroeconomic instability are analysed using a small Australian-type model, with rational expectations, where a too-high rate of inflation entails a continuum of equilibria, regarded as the root of macroeconomic instability. The credibility issue is then discussed in a simple optimal seignorage framework. Different institutional solutions, ranging from currency board to IMF conditionality, are discussed. Copyright 1999 by Oxford University Press.
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jafrec:v:8:y:1999:i:0:p:6-29
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