Monetary Policy Transmission in Sub-Saharan Africa : Evidence from Emerging and Frontier Markets / Johanna Tiedemann, Olivier Bizimana, Kiswendsida Tougouma.

Format:

Book

Government document

Author/Creator:

Tiedemann, Johanna.

Contributor:

Bizimana, Olivier.

Tougouma, Kiswendsida.

Series:

IMF Working Papers; Working Paper ; No. 2026/102

IMF Working Papers

Language:

English

Physical Description:

1 online resource (70 pages)

Place of Publication:

Washington, D.C. : International Monetary Fund, 2026.

Summary:

This paper empirically reassesses monetary policy transmission in emerging and frontier market economies in Sub-Saharan Africa (SSA EFMs). Using the identification approach of Romer and Romer (2004), we construct measures of monetary policy shocks and provide evidence on transmission mechanisms in the region. We show that monetary policy shocks pass through quickly to short-term market interest rates and lead to persistent increases in bank deposit and lending rates in most economies, indicating an operative bank-based interest rate channel. By contrast, exchange rates generally do not appreciate and, in many cases, depreciate following monetary tightening, consistent with the exchange rate puzzle—suggesting that interest rate hikes alone may be insufficient to systematically influence exchange rate movements. We also find that contractionary monetary policy reduces both output and inflation, with effects that are modest and notably weaker than in more developed economies. In addition, we find that transmission is stronger in economies that have adopted, or are transitioning toward, inflation-targeting regimes. Finally, we show that cross-country heterogeneity in transmission largely reflects differences in monetary policy transparency, financial development, and, to a lesser extent, fiscal dominance.

Notes:

Description based on print version record.

ISBN:

9798229044233