Monetary Growth and Exchange Rate Depreciation As Causes of Inflation in African Countries: An Empirical Analysis

Elie Canetti and Joshua Greene

No 1991/067, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the relative importance of monetary growth and exchange rate depreciation as causes of inflation in a sample of 10 Sub-Saharan African countries. Causality tests and impulse response functions derived from vector autoregression (VAR) analysis suggest that both monetary expansion and exchange rate adjustments cause inflation in a number of these countries. However, the failure of the tests to attribute the bulk of the variance in inflation in most of the countries to either variable suggests either a problem with the statistical technique or that some other factor--perhaps structural bottlenecks or a measure of overall macroeconomic policy stance incorporating both monetary and exchange rate policy--may be even more important as a determinant of inflation in African countries.

Keywords: WP; exchange rate; country; price; inflation rate; monetary growth; price data; movements in Africa; exchange rate series; exchange rate vis-à-vis; Exchange rates; Inflation; Exchange rate adjustments; Consumer prices; Monetary expansion; Africa; Sub-Saharan Africa (search for similar items in EconPapers)
Pages: 49
Date: 1991-07-01
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Citations: View citations in EconPapers (10)

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