Fiscal and Monetary Anchors for Price Stability: Evidence From Sub-Saharan Africa

Fund, International Monetary

doi:10.5089/9781451869811.001

Cited by 5 publications

(1 citation statement)

References 36 publications

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“…Overall, a number of studies argue that there is need for fiscal and monetary convergence in developing countries particularly in Africa and SADC. For example, Baldini and Ribeiro (2008) in their analysis of fiscal and monetary anchors of price stability in Sub Saharan Africa indicate that fiscal outcomes could be a direct source of inflation variability to different shocks in Sub Saharan countries from 1980-2005. More so, Obinyeluaku and Viegi (2009) suggest that, fiscal policy can affect monetary policy through monetisation or direct effect on price dynamics.…”

Section: Literature Reviewmentioning

confidence: 99%

Possibility of SADC Monetary Union: Testing for Coordination of Fiscal and Monetary Policies

Mhambi¹,

Mishi²

2019

J. Rev. Global Econ.

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There is consensus that fiscal and monetary policies should be coordinated into a broader macroeconomic framework for sustainable monetary union. The Brexit scenario, and the debt problems of some European Union members has vindicated reconsideration of premises on which monetary unions are setup. Southern African Development Community (SADC) had mooted the idea of a monetary union, despite the Rand Common Currency Area not being successful. However, there has been little literature on coordination of fiscal and monetary policies within and across SADC countries. The aim of this study is to examine whether the key macroeconomic policies are coordinated in order to create a springboard for a sustainable monetary union. The study employed panel data analysis techniques on 14 SADC countries. The Pooled Mean Group (PGM) method was applied to constrain the long-run coefficients to be identical, but allow the short-run coefficients and error variance to differ across groups. The application of PGM technique allows the study to control for heterogeneity across countries and the time dependence that exist on most macroeconomic series. The empirical results show that there is fiscal and monetary policies coordination amongst some SADC countries. However, crosscountry differences on key macroeconomic fundamentals such debts, fiscal balances and money supply may hinder the formation of a monetary union and obstruct the economic survival initiatives for trade amongst member states. The paper concludes monetary union may naturally become necessary to facilitate cooperation and trade amongst countries once there exists shared goals.

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Section: Literature Reviewmentioning

confidence: 99%

Possibility of SADC Monetary Union: Testing for Coordination of Fiscal and Monetary Policies

Mhambi¹,

Mishi²

2019

J. Rev. Global Econ.

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Testing the Fiscal Theory of Price Level for Türkiye with Fourier-Based Empirical Approaches

Serin,

Demir

2024

Eskişehir Osmangazi Üniversitesi İktisadi Ve İdari Bilimler Dergisi

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Inflation is introduced as a monetary phenomenon in orthodox approaches. However, in the fiscal theory of the price level, the policies implemented by the fiscal authority, which determines the present value of intertemporal budget constraint independently of its liabilities, may be determinative of the price level. In this study, the validity of the fiscal theory of the price level for Türkiye was tested via the Fourier-ADL co-integration and Fourier Toda-Yamamoto causality approach. The findings indicate that fiscal policy was effective in determining the price level in the 1975-2021 period.

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The Impact of Fiscal Deficit on Inflation in Namibia

Eita

Manuel²,

Naimhwaka³

et al. 2021

Journal of Central Banking Theory and Practice

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This paper examined the impact of fiscal deficit on inflation in Namibia. The paper employed Autoregressive Distributed Lag Model (ARDL) and Granger causality approach using quarterly data for the period 2002 - 2017. Empirical results showed evidence of a long run positive effect of fiscal deficit on inflation in Namibia. This suggests that fiscal deficit has a direct effect on inflation in Namibia. The study also found a unidirectional causality running from fiscal deficit to inflation in Namibia. The study confirmed that South Africa’s prices have positive effect on inflation in Namibia. The key policy implication drawn for the result is that if not contained, high negative fiscal balances could impair the monetary policy objective of price stability. It is therefore advised that fiscal and monetary policies need to be well coordinated to bring fiscal deficit within acceptable level. Given that the main monetary policy goal in Namibia is to achieve and maintain price stability, the results in this study suggest that monitoring budget deficits and price developments in South Africa to develop informed policies is one way to achieve this objective.

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Fiscal and Monetary Anchors for Price Stability: Evidence From Sub-Saharan Africa

Abstract: This Working Paper should not be reported as representing the views of the IMF.

Cited by 5 publications

References 36 publications

Possibility of SADC Monetary Union: Testing for Coordination of Fiscal and Monetary Policies

Possibility of SADC Monetary Union: Testing for Coordination of Fiscal and Monetary Policies

Testing the Fiscal Theory of Price Level for Türkiye with Fourier-Based Empirical Approaches

The Impact of Fiscal Deficit on Inflation in Namibia

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