Do Monetary Policy Outcomes Promote Stability in Fragile Settings?

Author/Editor:

Oumar Diallo ; Steve Loris Gui-Diby ; Patrick A. Imam

Publication Date:

May 20, 2022

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 assesses how monetary policy outcomes affect fragility. Diving into the universe of the most prominent combinations of pursued monetary policy objectives across fragile settings, we examine the relationships between monetary policy outcomes and fragility and find the combination of reduction of inflation and lower unemployment to be the one that delivers the highest payoff in terms of promoting peace and cohesion. Setting aside challenges of monetary policy transmission, results from our analysis broadly confirm the above “winning” combination, with low inflation as a primary desired outcome and low unemployment rate as a secondary one. We also carry out a series of robustness tests, which confirm our findings. Overall, our results lend credence to the importance of paying attention—in the context of reducing fragility—to monetary policy outcomes.

Series:

Working Paper No. 2022/096

Frequency:

regular

English

Publication Date:

May 20, 2022

ISBN/ISSN:

9798400211058/1018-5941

Stock No:

WPIEA2022096

Pages:

55

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