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

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  • Elie Canetti

    (Princeton University)

  • Joshua Greene

    (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, using quarterly data from 1978 through 1989. 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.

Suggested Citation

  • Elie Canetti & Joshua Greene, 1992. "Monetary Growth and Exchange Rate Depreciation as Causes of Inflation in African Countries: An Empirical Analysis," Journal of African Development, African Finance and Economic Association (AFEA), vol. 1(1), pages 37-62.
    • Handle: RePEc:afe:journl:v:1:y:1992:i:2:p:37-62
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    Cited by:

    1. Dumitriu, Ramona & Stefanescu, Razvan, 2013. "Utilizarea cursurilor valutare drept ancore nominale antiinflaĊ£ioniste [The use of exchange rates as nominal anchors]," MPRA Paper 52415, University Library of Munich, Germany.
    2. Miss Nkunde Mwase, 2006. "An Empirical Investigation of the Exchange Rate Pass-Through to Inflation in Tanzania," IMF Working Papers 2006/150, International Monetary Fund.
    3. Asafo, Shuffield Seyram, 2019. "Exchange Rate Pass-through to Prices : Bayesian VAR Evidence for Ghana," MPRA Paper 92967, University Library of Munich, Germany.

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