Fiscal Dominance in Sub-Saharan Africa Revisited

Author/Editor:

John Hooley ; Lam Nguyen ; Mika Saito ; Shirin Nikaein Towfighian

Publication Date:

January 29, 2021

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

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.

Series:

Working Paper No. 2021/017

Subject:

Frequency:

regular

English

Publication Date:

January 29, 2021

ISBN/ISSN:

9781513567747/1018-5941

Stock No:

WPIEA2021017

Format:

Paper

Pages:

28

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