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

Author/Editor:

Elie Canetti ; Joshua E. Greene

Publication Date:

July 1, 1991

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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. 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.

Series:

Working Paper No. 1991/067

Subject:

Consumer price indexes Consumer prices Exchange rate adjustments Exchange rates Foreign exchange Inflation Monetary expansion Monetary policy Prices

English

Publication Date:

July 1, 1991

ISBN/ISSN:

9781451848830/1018-5941

Stock No:

WPIEA0671991

Pages:

49

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