3. Improving Monetary Policy Frameworks
Author:
International Monetary Fund
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Language:
English
Print Publication Date:
24 Apr 2014
Keywords:
REO; exchange rate; fragile state; monetary policy; MDRI country; Zimbabwe dollar; fragile country; oil-exporting country; country group composite; Exchange rates; Monetary policy frameworks; Inflation; Agricultural sector; Financial inclusion; Sub-Saharan Africa; Africa; Global; Southern Africa; West Africa; inflation-targeting country; transmission mechanism; foreign exchange; committee decision; broad money; Inflation targeting; Interbank rates

Abstract

With inflation declining to single digits in many sub-Saharan African countries since the early 2000s, central banks currently face a different set of challenges. In particular, as is the case in other countries, the relationship between money and inflation has become weaker in a low-inflation environment, as countries have opened their capital accounts, attracting capital inflows, and deepened their financial markets. As advanced economies exit from unconventional monetary policies that were designed to provide economic stimulus in the wake of the global financial crisis, their tightening of monetary policy will increase funding costs for frontier market economies and heighten the risk of reversal of capital flows as recently experienced by a number of emerging markets. Against this backdrop, this chapter considers the conduct of monetary policy and its recent evolution in a select group of countries in sub-Saharan Africa, including the key factors driving the changes and the challenges they pose, and how policymakers are responding to them. The downside risks and policy recommendations set out in this chapter underscore the need for vigilant and effective monetary policy to help mitigate the risks to macroeconomic and financial stability.

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Contributor Notes

This chapter was prepared by Hamid Davoodi, Mumtaz Hussain, R. Armando Morales, Bozena Radzewicz-Bak, Juan Treviño, and Oral Williams under the guidance of S. Kal Wajid and Michael Atingi-Ego. Research assistance was provided by Cleary Haines and George Rooney.
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Cover Regional Economic Outlook, April 2014, Sub-Saharan Africa
Regional Economic Outlook, April 2014, Sub-Saharan Africa
Fostering Durable and Inclusive Growth
ISBN:
9781484342886
ISSN:
2071-3207
Publication Date:
24 Apr 2014
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781484342886.086
Pages:
113

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