IDEAS home Printed from https://ideas.repec.org/h/pal/pmschp/978-3-031-04162-4_6.html
   My bibliography  Save this book chapter

Central Bank Independence, Exchange Rate Regime, Monetary Policy and Inflation in Africa

In: The Economics of Banking and Finance in Africa

Author

Listed:
  • Abel M. Agoba

    (Coventry University)

  • Vera Fiador

    (University of Ghana Business School)

  • Emmanuel Sarpong-Kumankoma

    (University of Ghana Business School)

  • Jarjisu Sa-Aadu

    (Tippie College of Business, University of Iowa)

Abstract

Theory associates the concepts of central bank independence (CBI), exchange rate regimes and monetary policy with price stability. Independent central banks and fixed exchange rates are institutional mechanisms that help keep inflation low by lending monetary policy credibility to governments. However, the two institutions are commonly analysed as substitutesSubstitutes that tie the hands of inflation-prone governments. Monetary policy effectiveness has also been a challenge in many developing countries; with suggestions that the institutional arrangement of central banks would have an impact on the outcome of monetary policy decisions. This study seeks to examine the interrelationships among these three concepts in Africa, where significant central bank independence reforms have taken place in both fixed and floating exchange rate regimes and with varied levels of monetary policy effectiveness. It uses data spanning 1970–2014, and a Two Step GMM, Two Stage Least Squares and Fixed Effects estimation methods. Results show that fixed exchange rate regimes have lower inflation rates than floating exchange rate regimes. However, CBI’s impact on inflation is higher in floating when compared to fixed exchange rate regimes. Also, monetary policy effectiveness is higher in Non-CFA Zone countries relative to CFA Zone countries. Its impact is enhanced by higher levels of CBI.

Suggested Citation

  • Abel M. Agoba & Vera Fiador & Emmanuel Sarpong-Kumankoma & Jarjisu Sa-Aadu, 2022. "Central Bank Independence, Exchange Rate Regime, Monetary Policy and Inflation in Africa," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Joshua Yindenaba Abor & Charles Komla Delali Adjasi (ed.), The Economics of Banking and Finance in Africa, chapter 0, pages 183-225, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-031-04162-4_6
    DOI: 10.1007/978-3-031-04162-4_6
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ofori-Sasu, Daniel & Agbloyor, Elikplimi Komla & Nsafoah, Dennis & Asongu, Simplice A., 2024. "Banking behaviour and political business cycle in Africa: The role of independent regulatory policies of the central bank," The Journal of Economic Asymmetries, Elsevier, vol. 29(C).
    2. Bulat Mukhamediyev & Sayat Zhamanbayev & Aliya Mukhamediyeva, 2024. "Central Bank Independence and Oil Prices Impact on Macroeconomic Indicators," International Journal of Energy Economics and Policy, Econjournals, vol. 14(3), pages 9-17, May.

    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:pal:pmschp:978-3-031-04162-4_6. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave.com .

    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.