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Monetary Policy and Governance, Commodity Price Volatility and Tax Revenues in Sub-Saharan Africa

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  • Honoré S. Houngbédji
  • Nassibou Bassongui

Abstract

This paper investigates the mitigating role of monetary policy and governance in the tax revenue effects of commodity price volatility (CPV) in sub-Saharan Africa. We propose a dynamic panel threshold regression to take into account both the nonlinearity in the relationship between tax revenues and CPV and the endogeneity issues. The estimations show that CPV hurt tax revenues only in the high regime of CPV. Thus, a one-standard-deviation increase in CPV significantly reduces sub-Saharan Africa tax revenues. We also show that low-interest rate, better credits to the economy, and better control of corruption mitigate the detrimental effects of CPV. Sub-Saharan African policymakers should promote accommodative monetary policies, nonconventional monetary policies, and good political governance to tackle the detrimental effects of CPV.

Suggested Citation

  • Honoré S. Houngbédji & Nassibou Bassongui, 2023. "Monetary Policy and Governance, Commodity Price Volatility and Tax Revenues in Sub-Saharan Africa," Public Finance Review, , vol. 51(6), pages 838-863, November.
    • Handle: RePEc:sae:pubfin:v:51:y:2023:i:6:p:838-863
    DOI: 10.1177/10911421231151497
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    References listed on IDEAS

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    4. Mr. Dhaneshwar Ghura, 1998. "Tax Revenue in Sub-Saharan Africa: Effects of Economic Policies and Corruption," IMF Working Papers 1998/135, International Monetary Fund.
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    More about this item

    Keywords

    commodity price volatility; tax revenues; monetary policy; governance; JEL Code:; E62; E52; O13;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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