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Inflation and Monetary Policy in a Low-Income and Fragile State: The Case of Guinea

Author

Listed:
  • Yan Carrière-Swallow
  • Nelnan Fidèle Koumtingué
  • Sebastian Weber

Abstract

Inflation in low-income countries is often high and volatile, driven by external shocks. In addition, inflation in fragile states is affected by highly volatile domestic factors that complicate monetary policy's ability to deliver price stability. We estimate the drivers of inflation in Guinea since the early 2000s, a period in which the country suffered major shocks from pandemics, commodity price movements, and multiple military coups, and during which inflation averaged 12%. Results confirm that global commodity and transport prices account for a large share of the variation in inflation. The contribution of monetary policy shocks to inflation is moderate, reflecting its broadly neutral stance throughout most of the last two decades. However, monetary policy has occasionally made larger contributions to inflation, and recently helped contain price pressures from high commodity prices. The effectiveness of monetary policy reflects a strong relationship between monetary aggregates and the exchange rate.

Suggested Citation

  • Yan Carrière-Swallow & Nelnan Fidèle Koumtingué & Sebastian Weber, 2025. "Inflation and Monetary Policy in a Low-Income and Fragile State: The Case of Guinea," Journal of African Economies, Centre for the Study of African Economies, vol. 34(1), pages 1-25.
    • Handle: RePEc:oup:jafrec:v:34:y:2025:i:1:p:1-25.
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    File URL: http://hdl.handle.net/10.1093/jae/ejad024
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    Keywords

    monetary policy; inflation; low-income countries; fragile states; JEL classification: E31; E52; O23;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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