IDEAS home Printed from https://ideas.repec.org/a/eee/finana/v94y2024ics1057521924001881.html
   My bibliography  Save this article

Do central bankers' characteristics matter for Africa? Ethnic favoritism, fractionalization, and inflation

Author

Listed:
  • Strong, Christine
  • Yayi, Constant L.

Abstract

Using a newly constructed dataset over the period 1984–2017 for 21 African countries, this study investigates the influence of central bankers' personal characteristics, including educational and professional backgrounds, as well as ethnic affiliation, on inflation. The central hypothesis posits that shared ethnic affiliation between the central banker and the head of the executive branch signals an alliance between monetary and fiscal authorities, suggesting a preference for a more accommodating central banker. The results strongly support the existence of ethnic favoritism, indicating that the impact of joint ethnicity on inflation is contingent on the level of ethnic diversity within a country. Notably, as ethnic diversity increases, joint ethnicity results in a more modest reduction in inflation. Additionally, the analysis reveals that in ethnically diverse settings, inflation tends to be lower when there is ethnic alignment between the central banker and the head of state, compared to scenarios without such alignment.

Suggested Citation

  • Strong, Christine & Yayi, Constant L., 2024. "Do central bankers' characteristics matter for Africa? Ethnic favoritism, fractionalization, and inflation," International Review of Financial Analysis, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:finana:v:94:y:2024:i:c:s1057521924001881
    DOI: 10.1016/j.irfa.2024.103256
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1057521924001881
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irfa.2024.103256?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Loayza, Norman V. & Ranciere, Romain, 2006. "Financial Development, Financial Fragility, and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 1051-1076, June.
    2. Alberto Alesina & Eliana La Ferrara, 2000. "Participation in Heterogeneous Communities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 847-904.
    3. Kenneth N. Kuttner & Adam S. Posen, 2010. "Do Markets Care Who Chairs the Central Bank?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(2‐3), pages 347-371, March.
    4. Ulrike Malmendier & Stefan Nagel & Zhen Yan, 2017. "The Making of Hawks and Doves: Inflation Experiences on the FOMC," NBER Working Papers 23228, National Bureau of Economic Research, Inc.
    5. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1203-1250.
    6. Posner,Daniel N., 2005. "Institutions and Ethnic Politics in Africa," Cambridge Books, Cambridge University Press, number 9780521541794, November.
    7. Rachel Glennerster & Edward Miguel & Alexander D. Rothenberg, 2013. "Collective Action in Diverse Sierra Leone Communities," Economic Journal, Royal Economic Society, vol. 0, pages 285-316, May.
    8. Ethan Ilzetzki & Carmen M Reinhart & Kenneth S Rogoff, 2019. "Exchange Arrangements Entering the Twenty-First Century: Which Anchor will Hold?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(2), pages 599-646.
    9. Dreher, Axel & Lamla, Michael J. & Lein, Sarah M. & Somogyi, Frank, 2009. "The impact of political leaders' profession and education on reforms," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 169-193, March.
    10. Strong, Christine & Yayi, Constant, 2021. "Central bank independence, fiscal deficits and currency union: Lessons from Africa," Journal of Macroeconomics, Elsevier, vol. 68(C).
    11. Widmer, Philine & Zurlinden, Noémie, 2022. "Ministers Engage in Favoritism Too," Journal of Public Economics, Elsevier, vol. 213(C).
    12. Benjamin F. Jones & Benjamin A. Olken, 2005. "Do Leaders Matter? National Leadership and Growth Since World War II," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 835-864.
    13. John Maloney & Andrew C. Pickering & Kaddour Hadri, 2003. "Political Business Cycles and Central Bank Independence," Economic Journal, Royal Economic Society, vol. 113(486), pages 167-181, March.
    14. Franck, Raphaã‹L & Rainer, Ilia, 2012. "Does the Leader's Ethnicity Matter? Ethnic Favoritism, Education, and Health in Sub-Saharan Africa," American Political Science Review, Cambridge University Press, vol. 106(2), pages 294-325, May.
    15. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," The World Bank Economic Review, World Bank, vol. 6(3), pages 353-398, September.
    16. Prachi Mishra & Ariell Reshef, 2019. "How Do Central Bank Governors Matter? Regulation and the Financial Sector," Post-Print halshs-02973367, HAL.
    17. Timothy Besley & Jose G. Montalvo & Marta Reynal‐Querol, 2011. "Do Educated Leaders Matter?," Economic Journal, Royal Economic Society, vol. 121(554), pages 205-205, August.
    18. Jakob Haan & Christina Bodea & Raymond Hicks & Sylvester C. W. Eijffinger, 2018. "Central Bank Independence Before and After the Crisis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(2), pages 183-202, June.
    19. Alberto Alesina & Eliana La Ferrara, 2003. "Ethnic Diversity and Economic Performance," Harvard Institute of Economic Research Working Papers 2028, Harvard - Institute of Economic Research.
    20. Benedicte Vibe Christensen, 2011. "Have monetary transmission mechanisms in Africa changegd?," BIS Papers chapters, in: Bank for International Settlements (ed.), Central banking in Africa: prospects in a changing world, volume 56, pages 37-61, Bank for International Settlements.
    21. Mercedes Haga, 2015. "On central bank independence and political cycles," Journal of Applied Economics, Universidad del CEMA, vol. 18, pages 267-296, November.
    22. De Luca, Giacomo & Hodler, Roland & Raschky, Paul A. & Valsecchi, Michele, 2018. "Ethnic favoritism: An axiom of politics?," Journal of Development Economics, Elsevier, vol. 132(C), pages 115-129.
    23. William D. Nordhaus, 1975. "The Political Business Cycle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(2), pages 169-190.
    24. Prachi Mishra & Ariell Reshef, 2019. "How Do Central Bank Governors Matter? Regulation and the Financial Sector," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(2-3), pages 369-402, March.
    25. Ariel Rubinstein, 2006. "A Sceptic's Comment on the Study of Economics," Economic Journal, Royal Economic Society, vol. 116(510), pages 1-9, March.
    26. Gohlmann, Silja & Vaubel, Roland, 2007. "The educational and occupational background of central bankers and its effect on inflation: An empirical analysis," European Economic Review, Elsevier, vol. 51(4), pages 925-941, May.
    27. Strong, Christine Olivia, 2021. "Political influence, central bank independence and inflation in Africa: A comparative analysis," European Journal of Political Economy, Elsevier, vol. 69(C).
    28. Marta Campillo & Jeffrey A. Miron, 1997. "Why Does Inflation Differ across Countries?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 335-362, National Bureau of Economic Research, Inc.
    29. Daniel N. Posner, 2004. "Measuring Ethnic Fractionalization in Africa," American Journal of Political Science, John Wiley & Sons, vol. 48(4), pages 849-863, October.
    30. Vincenzo Verardi & Christophe Croux, 2009. "Robust regression in Stata," Stata Journal, StataCorp LP, vol. 9(3), pages 439-453, September.
    31. Michael Bleaney & Manuela Francisco, 2005. "Exchange rate regimes and inflation: only hard pegs make a difference," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(4), pages 1453-1471, November.
    32. Lars Leszczensky & Tobias Wolbring, 2022. "How to Deal With Reverse Causality Using Panel Data? Recommendations for Researchers Based on a Simulation Study," Sociological Methods & Research, , vol. 51(2), pages 837-865, May.
    33. Berger, Helge & Woitek, Ulrich, 1997. "How opportunistic are partisan German central bankers: Evidence on the Vaubel hypothesis," European Journal of Political Economy, Elsevier, vol. 13(4), pages 807-821, December.
    34. Roland Hodler & Paul A. Raschky, 2014. "Regional Favoritism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 995-1033.
    35. Adolph,Christopher, 2013. "Bankers, Bureaucrats, and Central Bank Politics," Cambridge Books, Cambridge University Press, number 9781107032613, November.
    36. Mercedes Haga, 2015. "On Central Bank Independence and Political Cycles," Journal of Applied Economics, Taylor & Francis Journals, vol. 18(2), pages 267-295, November.
    37. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    38. Posner,Daniel N., 2005. "Institutions and Ethnic Politics in Africa," Cambridge Books, Cambridge University Press, number 9780521833981, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Strong, Christine & Yayi, Constant L., 2023. "The political affiliation of central bankers and government debt: Evidence from Africa," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 603-620.
    2. De Luca, Giacomo & Hodler, Roland & Raschky, Paul A. & Valsecchi, Michele, 2018. "Ethnic favoritism: An axiom of politics?," Journal of Development Economics, Elsevier, vol. 132(C), pages 115-129.
    3. D. Masciandaro, 2019. "What Bird Is That? Central Banking And Monetary Policy In The Last Forty Years," BAFFI CAREFIN Working Papers 19127, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    4. Oriola, Hugo, 2023. "Political monetary cycles: An empirical study," European Journal of Political Economy, Elsevier, vol. 79(C).
    5. Cheng, Hui-Pei & Swee, Eik Leong, 2024. "Farewell President! Political favoritism, economic inequality, and political polarization," European Journal of Political Economy, Elsevier, vol. 81(C).
    6. Bluhm, Richard & Thomsson, Kaj, 2020. "Holding on? Ethnic divisions, political institutions and the duration of economic declines," Journal of Development Economics, Elsevier, vol. 144(C).
    7. Rachel M. Gisselquist & Stefan Leiderer & Miguel Niño-Zarazúa, 2014. "Ethnic Heterogeneity and Public Goods Provision in Zambia: Further Evidence of a Subnational 'Diversity Dividend'," WIDER Working Paper Series wp-2014-162, World Institute for Development Economic Research (UNU-WIDER).
    8. Elena Perra, 2022. "Road to Division: Ethnic Favouritism in the Provision of Road Infrastructure in Ethiopia," Working Papers - Economics wp2022_01.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    9. Soumahoro, Souleymane, 2020. "Ethnic politics and Ebola response in West Africa," World Development, Elsevier, vol. 135(C).
    10. Robin Burgess & Remi Jedwab & Edward Miguel & Ameet Morjaria & Gerard Padró i Miquel, 2015. "The Value of Democracy: Evidence from Road Building in Kenya," American Economic Review, American Economic Association, vol. 105(6), pages 1817-1851, June.
    11. Franck, Raphaël & Rainer, Ilia, 2012. "Does the Leader's Ethnicity Matter? Ethnic Favoritism, Education, and Health in Sub-Saharan Africa," American Political Science Review, Cambridge University Press, vol. 106(2), pages 294-325, May.
    12. Gisselquist, Rachel M. & Leiderer, Stefan & Niño-Zarazúa, Miguel, 2016. "Ethnic Heterogeneity and Public Goods Provision in Zambia: Evidence of a Subnational “Diversity Dividend”," World Development, Elsevier, vol. 78(C), pages 308-323.
    13. Harry Pickard, 2018. "Does Congressional experience in US governors influence state transfers?," Working Papers 2018014, The University of Sheffield, Department of Economics.
    14. Mercier, Marion, 2016. "The return of the prodigy son: Do return migrants make better leaders?," Journal of Development Economics, Elsevier, vol. 122(C), pages 76-91.
    15. Hayo, Bernd & Neumeier, Florian, 2014. "Political leaders' socioeconomic background and fiscal performance in Germany," European Journal of Political Economy, Elsevier, vol. 34(C), pages 184-205.
    16. Joseph Flavian Gomes, 2020. "The health costs of ethnic distance: evidence from sub-Saharan Africa," Journal of Economic Growth, Springer, vol. 25(2), pages 195-226, June.
    17. Prachi Mishra & Ariell Reshef, 2019. "How Do Central Bank Governors Matter? Regulation and the Financial Sector," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(2-3), pages 369-402, March.
    18. Andrew Dickens, 2017. "Ethnolinguistic Favoritism in African Politics," Working Papers 1702, Brock University, Department of Economics.
    19. Fuchs, Andreas & Richert, Katharina, 2015. "Do Development Minister Characteristics Affect Aid Giving?," Working Papers 0604, University of Heidelberg, Department of Economics.
    20. Christine Strong, 2024. "What type of central banker dampens the political business cycle? The case of Africa," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 1920-1946, April.

    More about this item

    Keywords

    Ethnic affiliation; Ethnic fractionalization; Favoritism; Central bank governors; Ally; President; Inflation;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:94:y:2024:i:c:s1057521924001881. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620166 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.