Fiscal Dominance in Sub-Saharan Africa Revisited

29 Pages Posted: 9 Mar 2021

See all articles by John Hooley

John Hooley

International Monetary Fund (IMF)

Lam Nguyen

University of California, San Diego (UCSD)

Mika Saito

International Monetary Fund (IMF)

Shirin Nikaein Towfighian

International Monetary Fund (IMF)

Date Written: January 2021

Abstract

This paper explores the causes and consequences of fiscal dominance over monetary policy in Sub-Saharan Africa (SSA). Fiscal dominance has always been a pressing problem as it can contribute to inflation and macroeconomic instability, and increasingly so as fiscal deficits and public debt are rising in many SSA countries. We find that legal limits and availability of alternative financing options play an important role in determining the extent to which government deficits tend to be financed by the central bank. We also find economically significant effects of central bank lending to government on the exchange rate and inflation.

JEL Classification: E31, E52, E58, E62, E63, F31, H62, H63, E61, E50, H20, G21

Suggested Citation

Hooley, John and Nguyen, Lam and Saito, Mika and Nikaein Towfighian, Shirin, Fiscal Dominance in Sub-Saharan Africa Revisited (January 2021). IMF Working Paper No. 2021/017, Available at SSRN: https://ssrn.com/abstract=3799609

John Hooley (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Lam Nguyen

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States

Mika Saito

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Shirin Nikaein Towfighian

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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