Revisiting the drivers of inflation in Sub-Saharan Africa after COVID-19

Dennis Nsafoah (), Cosmas Dery () and Ayobami E. Ilori ()
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Dennis Nsafoah: Niagara University
Cosmas Dery: Sam Houston State University
Ayobami E. Ilori: The Open University UK

Empirical Economics, 2025, vol. 68, issue 3, No 4, 1073-1112

Abstract: Abstract The recent global inflation surge has revived debates on its drivers and the essential role of price stability in the macroeconomy. This paper examines the drivers of inflation and their relative importance in the Sub-Saharan African (SSA) region from 2003 to 2022, with a specific spotlight on the COVID-19 pandemic era. We use a Bayesian VAR model with a penalty function approach to identify different shocks that drive inflation. We find a significant shift in the drivers of inflation, with external shocks (global demand and supply) explaining 63% of the inflation rise during the pandemic era compared to 38% in the pre-pandemic era, at the SSA aggregate level. We also observe heterogeneity in inflation drivers across SSA sub-regions and individual countries, highlighting distinct patterns in inflation drivers. These results suggest that policy responses should be tailored to the characteristics of each sub-region and country to effectively manage inflation and reduce the effects of external and internal shocks on price stability.

Keywords: Inflation; Monetary policy; External shocks; Domestic shocks; Sub-Saharan Africa (search for similar items in EconPapers)
JEL-codes: E31 E52 F41 F44 O55 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s00181-024-02666-0

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