Effect Of Exchange Rate Movements On Inflation In Sub Saharan Africa

Author : Laurent Kemoe,Moustapha Mbohou,Hamza Mighri,Mr. Saad N Quayyum
Publisher : International Monetary Fund
Page : 36 pages
File Size : 43,5 Mb
Release : 2024-03-15
Category : Business & Economics
ISBN : 9798400269264

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Effect of Exchange Rate Movements on Inflation in Sub-Saharan Africa by Laurent Kemoe,Moustapha Mbohou,Hamza Mighri,Mr. Saad N Quayyum Pdf

This paper provides new evidence on the exchange rate passthrough to domestic inflation in Sub-Saharan Africa (SSA) using both bilateral US dollar exchange rate and the nominal effective exchange rate (NEER), and monthly data. We find that depreciations cause sizable increases in domestic inflation. The passthrough in SSA is higher than in other regions and its magnitude depends on the exchange rate regime, type of exchange rate (bilateral versus NEER), natural resource endowment and domestic market competitiveness. The passthrough is found to be disproportionately larger and more persistent for large depreciation shocks, and for exchange rate changes that are more persistent. We also find evidence of asymmetry, with passthrough eight times stronger during depreciations than appreciations. Additional findings suggest that improved monetary policy effectiveness is an important driver of our observed declining estimates of exchange rate passthrough over time, supporting the long-standing view that strengthening monetary policy frameworks and credibility helps mitigate the impact of depreciations on inflation.

Author : Ajay Chhibber
Publisher : World Bank Publications
Page : 35 pages
File Size : 50,9 Mb
Release : 1991
Category : Africa
ISBN : 8210379456XXX

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Africa's Rising Inflation by Ajay Chhibber Pdf

Is there a link between devaluation and high inflation? It depends on accompanying monetary and fiscal policies and the presence of parallel markets. An open capital account would curtail fiscal profligacy and provide price stability without jeopardizing growth.

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 22 pages
File Size : 43,7 Mb
Release : 1989-10-19
Category : Business & Economics
ISBN : 9781451953657

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Inflation in African Countries by International Monetary Fund Pdf

Since the mid-1970s the annual inflation rate in Africa has averaged more than 15 percent, with many countries experiencing rates of 20 percent or more. Inflation rates of this magnitude have significant adverse effects on the financial sectors of African countries, particularly in the context of fixed nominal interest rates. Econometric analysis points strongly to monetary expansion as a major cause of inflation in African countries generally. Exchange rate depreciation is also associated with higher inflation, although in some countries the domestic currency was depreciated to offset the effects of recent inflation, rather than being a cause of inflation.

Author : Mr.Alexander W. Hoffmaister
Publisher : International Monetary Fund
Page : 31 pages
File Size : 46,9 Mb
Release : 1997-07-01
Category : Business & Economics
ISBN : 9781451954746

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Macroeconomic Fluctuations in Sub-Saharan Africa by Mr.Alexander W. Hoffmaister Pdf

The sources of macroeconomic fluctuations in sub–Saharan African are examined by comparing the CFA franc countries with the non–CFA franc countries. External shocks, especially terms of trade shocks, appear to have a greater influence on fluctuations of output and the real exchange rate in CFA franc countries. This result does not appear to be associated with differences in the economic structure but may reflect the fixed exchange rate regime, which does not (partially) buffer these countries from external shocks. Macroeconomic fluctuations in non–CFA franc countries are similar to those in other developing countries, particularly in Latin America.

Author : Brian Pinto
Publisher : World Bank Publications
Page : 37 pages
File Size : 52,9 Mb
Release : 1988
Category : Black market
ISBN : 8210379456XXX

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Black Markets for Foreign Exchange, Real Exchange Rates, and Inflation by Brian Pinto Pdf

Inflation could rise permanently and substantially as a result of unifying official and black market exchange rates, even if real government spending remains constant.

Author : Stella Kaendera,S. V. S. Dixit,Nabil Ben Ltaifa
Publisher : International Monetary Fund
Page : 25 pages
File Size : 45,7 Mb
Release : 2009-12-15
Category : Business & Economics
ISBN : 9781462389889

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Impact of the Global Financial Crisis on Exchange Rates and Policies in Sub-Saharan Africa by Stella Kaendera,S. V. S. Dixit,Nabil Ben Ltaifa Pdf

This paper studies the evolution of the exchange rates of sub-Saharan African currencies in the context of the global financial crisis. In particular, it analyzes the reasons behind the differences in the magnitude and volatility of the exchange rates among countries. To this end, it takes a sample of seven countries, four members of the East African Community (EAC) (Kenya, Rwanda, Tanzania, and Uganda), and three others, which experienced large exchange rate losses at the onset of the crisis: Ghana, Nigeria, and Zambia. First, it analyzes the movements of the exchange rates with respect to the U.S. dollar and two other major currencies. Second, it tries to link the magnitude of their movements to key factors, relating to the external environment and the countries’ internal policies.

Author : Mr.Elie Canetti,Mr.Joshua E. Greene
Publisher : International Monetary Fund
Page : 49 pages
File Size : 42,7 Mb
Release : 1991-07-01
Category : Business & Economics
ISBN : 9781451848830

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Monetary Growth and Exchange Rate Depreciation As Causes of Inflation in African Countries by Mr.Elie Canetti,Mr.Joshua E. Greene Pdf

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.

Author : Mr.Alun H. Thomas
Publisher : International Monetary Fund
Page : 21 pages
File Size : 50,7 Mb
Release : 2012-08-01
Category : Business & Economics
ISBN : 9781475505580

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Exchange Rate and Foreign Interest Rate Linkages for Sub-Saharan Africa Floaters by Mr.Alun H. Thomas Pdf

The paper considers the determinants of exchange rate movements among sub-Saharan countries that have flexible exchange rate regimes. The determinants are based on the law of one price and interest parity conditions. Results indicate that the exchange rates have responded significantly to changes in the US Treasury bill rate and to the EMBI spread in recent years. The effects are more important for countries with open capital accounts. On the other hand the paper does not provide any support for the interest rate parity theory because domestic interest rates have no bearing on exchange rate movements.

Author : Mr.Mauro Mecagni,Mr.Juan S Corrales,Mr.Jemma Dridi,Mr.Rodrigo Garcia-Verdu,Patrick A. Imam,Mr.Justin Matz,Ms.Carla Macario,Mr.Rodolfo Maino,Mr.Yibin Mu,Ashwin Moheeput,Mr.Futoshi Narita,Mr.Marco Pani,Mr.Manuel Rosales Torres,Mr.Sebastian Weber,Mr.Etienne B Yehoue
Publisher : International Monetary Fund
Page : 75 pages
File Size : 53,5 Mb
Release : 2015-05-15
Category : Business & Economics
ISBN : 9781498368476

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Dollarization in Sub-Saharan Africa by Mr.Mauro Mecagni,Mr.Juan S Corrales,Mr.Jemma Dridi,Mr.Rodrigo Garcia-Verdu,Patrick A. Imam,Mr.Justin Matz,Ms.Carla Macario,Mr.Rodolfo Maino,Mr.Yibin Mu,Ashwin Moheeput,Mr.Futoshi Narita,Mr.Marco Pani,Mr.Manuel Rosales Torres,Mr.Sebastian Weber,Mr.Etienne B Yehoue Pdf

Dollarization—the use of foreign currencies as a medium of exchange, store of value, or unit of account—is a notable feature of financial development under macroeconomically fragile conditions. It has emerged as a key factor explaining vulnerabilities and currency crises, which have long been observed in Latin America, parts of Asia, and Eastern Europe. Dollarization is also present, prominently, in sub-Saharan Africa (SSA) where it remains significant and persistent at over 30 percent rates for both bank loans and deposits—although it has not increased significantly since 2001. However, progress in reducing dollarization has lagged behind other regions and, in this regard, it is legitimate to ask whether this phenomenon is an important concern in SSA. This study fills a gap in the literature by analyzing these issues with specific reference to the SSA region on the basis of the evidence for the past decade.

Author : Nguyuru Haruna Ibrahim Lipumba
Publisher : Unknown
Page : 76 pages
File Size : 45,7 Mb
Release : 1997
Category : Africa, Sub-Saharan
ISBN : OSU:32435057952954

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The Liberalization of Foreign Exchange Markets and Economic Growth in Sub-Saharan Africa by Nguyuru Haruna Ibrahim Lipumba Pdf

The Liberalization of Foreign Exchange Markets & Economic Growth in Sub-Saharan Africa offers an historical rationale for intervention in foreign exchange markets to promote long-term development. It also reviews exchange rate theory & balance of payments management & their application to African countries. The publication is part of the Research for Action series which discusses policy-oriented research on the main strategic issues of development & international cooperation, as well as on the interaction between domestic & global changes.

Author : Anh D. M. Nguyen,Mr.Jemma Dridi,Ms.Filiz Unsal,Mr.Oral Williams
Publisher : International Monetary Fund
Page : 28 pages
File Size : 43,9 Mb
Release : 2015-08-05
Category : Business & Economics
ISBN : 9781513583013

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On the Drivers of Inflation in Sub-Saharan Africa by Anh D. M. Nguyen,Mr.Jemma Dridi,Ms.Filiz Unsal,Mr.Oral Williams Pdf

The perception that inflation dynamics in Sub-Saharan Africa (SSA) are driven by supply shocks implies a limited role for monetary policy in influencing inflation in the short run. SSA’s rapid growth, its integration with the global economy, changes in the policy frameworks, among others, in the last decade suggest that the drivers of inflation may have changed. We quantitatively analyze inflation dynamics in SSA using a Global VAR model, which incorporates trade and financial linkages among economies, as well as the role of regional and global demand and inflationary spillovers. We find that in the past 25 years, the main drivers of inflation have been domestic supply shocks and shocks to exchange rate and monetary variables; but that, in recent years, the contribution of these shocks to inflation has fallen. Domestic demand pressures as well as global shocks, and particularly shocks to output, however, have played a larger role in driving inflation over the last decade. We also show that country characteristics matter—the extent of oil and food imports, vulnerability to weather shocks, economic importance of agriculture, trade openness and policy regime, among others, help in explaining the role of shocks.

Author : Mr.Nils Øyvind Mæhle,Ms.Haimanot Teferra,Mrs.Armine Khachatryan
Publisher : International Monetary Fund
Page : 71 pages
File Size : 46,5 Mb
Release : 2013-01-31
Category : Business & Economics
ISBN : 9781557756695

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Exchange Rate Liberalization in Selected Sub-Saharan African Countries Successes, Failures, and Lessons by Mr.Nils Øyvind Mæhle,Ms.Haimanot Teferra,Mrs.Armine Khachatryan Pdf

Many sub-Saharan African (SSA) countries liberalized their economies in the 1980s and early 1990s. This paper reviews the foreign exchange regime reforms in selected SSA, and their associated macroeconomic policies and economic performance during and after these reforms were undertaken. Before liberalization, most of the reviewed countries were characterized by extensive foreign exchange rationing, sizeable black market premiums, and declining per capita real income. Today, the countries that successfully reformed look markedly different. Rationing and parallel market spreads are a distant memory, and per capita income has increased sharply.

Author : Mr.Ivohasina Fizara Razafimahefa
Publisher : International Monetary Fund
Page : 57 pages
File Size : 48,7 Mb
Release : 2012-06-01
Category : Business & Economics
ISBN : 9781475503982

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Exchange Rate Pass-Through in Sub-Saharan African Economies and its Determinants by Mr.Ivohasina Fizara Razafimahefa Pdf

This paper analyzes the exchange rate pass-through to domestic prices and its determinants in sub-Saharan African countries. It finds that the pass-through is incomplete. The pass-through is larger following a depreciation than after an appreciation of the local currency. The average elasticity is estimated at about 0.4. It is lower in countries with more flexible exchange rate regimes and in countries with a higher income. A low inflation environment, a prudent monetary policy, and a sustainable fiscal policy are associated with a lower pass-through. The degree of pass-through has declined in the SSA region since the mid-1990s following marked improvements in macroeconomic and political environments.

Author : Mr.Kenneth Rogoff,Ms.Carmen Reinhart
Publisher : International Monetary Fund
Page : 42 pages
File Size : 50,9 Mb
Release : 2003-01-01
Category : Business & Economics
ISBN : 9781451842715

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FDI to Africa by Mr.Kenneth Rogoff,Ms.Carmen Reinhart Pdf

Africa lags behind other regions in attracting foreign direct investment (FDI). In some circumstances, there are obvious explanations for the absence of FDI, such as a high incidence of war. In this paper, we examine the role that monetary and exchange rate policy may have played in explaining this outcome. Specifically, we document the incidence of inflationary episodes and currency crashes in order to compare countries within the region as well as to make comparisons with other regions. Furthermore, since monetary policy can range from very transparent to very opaque, we assess Africa's track record with dual and parallel markets. We use the parallel market premia as an indicator of the degree of distortions and extent of transparency. Our findings suggest that this is a promising line of inquiry because Africa does stand apart from other regions in this measure of transparency. We also discuss some of the fiscal underpinnings of Africa's bouts with high inflation.

Author : Mustapha Rouis,Weshab Razzak,Carlos Mollinedo
Publisher : World Bank Publications
Page : 96 pages
File Size : 50,6 Mb
Release : 1994
Category : Devaluation of currency
ISBN : 8210379456XXX

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The Supply Response to Exchange Rate Reform in Sub-Saharan Africa by Mustapha Rouis,Weshab Razzak,Carlos Mollinedo Pdf