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Monetary Growth and Exchange Rate Depreciation As Causes of Inflation in African Countries: An Empirical Analysis
Author:
Mr. Elie Canetti
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Mr. Joshua E. Greene
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Series:
IMF Working Papers
Volume/Issue:
Volume 1991: Issue 067
Language:
English
Publication Date:
01 Jul 1991
DOI:
https://doi.org/10.5089/9781451848830.001
ISBN:
9781451848830
ISSN:
1018-5941
Pages:
49
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
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund