Inflation in African Countries: General Issues and Effect on the Financial Sector

25 Pages Posted: 15 Feb 2006

Date Written: October 19, 1989

Abstract

Since the mid-1970s the annual inflation rate in Africa has averaged more than 15 percent, with many countries experiencing rates of 20 percent or more. Inflation rates of this magnitude have significant adverse effects on the financial sectors of African countries, particularly in the context of fixed nominal interest rates. Econometric analysis points strongly to monetary expansion as a major cause of inflation in African countries generally. Exchange rate depreciation is also associated with higher inflation, although in some countries the domestic currency was depreciated to offset the effects of recent inflation, rather than being a cause of inflation.

JEL Classification: 123, 134, 313

Suggested Citation

Greene, Joshua Eli, Inflation in African Countries: General Issues and Effect on the Financial Sector (October 19, 1989). IMF Working Paper No. 89/86, Available at SSRN: https://ssrn.com/abstract=885030

Joshua Eli Greene (Contact Author)

Singapore Management University ( email )

90 Stamford Road
178903
Singapore

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