How Would Monetary Policy Matter in the Proposed African Monetary Unions? Evidence from Output and Prices

African Finance Journal, 16(2), pp. 34-63 (2014).

33 Pages Posted: 9 Sep 2014 Last revised: 1 Apr 2015

See all articles by Simplice Asongu

Simplice Asongu

African Governance and Development Institute

Date Written: January 8, 2013

Abstract

We analyze the effects of monetary policy on economic activity in the proposed African monetary unions. Findings broadly show that: (1) but for financial efficiency in the EAMZ, monetary policy variables affect output neither in the short-run nor in the long-term and; (2) with the exception of financial size that impacts inflation in the EAMZ in the short-term, monetary policy variables generally have no effect on prices in the short-run. The WAMZ may not use policy instruments to offset adverse shocks to output by pursuing either an expansionary or a contractionary policy, while the EAMZ can do with the ‘financial allocation efficiency’ instrument. Policy implications are discussed.

Keywords: Monetary Policy; Banking; Inflation; Output effects; Africa

JEL Classification: E51; E52; E58; E59; O55

Suggested Citation

Asongu, Simplice, How Would Monetary Policy Matter in the Proposed African Monetary Unions? Evidence from Output and Prices (January 8, 2013). African Finance Journal, 16(2), pp. 34-63 (2014).. Available at SSRN: https://ssrn.com/abstract=2493341 or http://dx.doi.org/10.2139/ssrn.2493341

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

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