The Determinants Of Monetary Policy Transparency In Sub-Saharan Africa

Abstract

he study investigates the contribution of key macroeconomic and institutional variables in shaping the likelihood of choosing a monetary policy transparency regime in Sub-Saharan Africa. Monetary policy transparency refers to political transparency, operational transparency, policy transparency, economic transparency and procedural transparency by a central bank. Whereas monetary policy, on the other hand, refers to the regulation of the money supply and interest rates by a central bank, with the goal of controlling inflation and stabilizing the currency. One of the peculiarities of developing countries is that they lack credibility in their monetary policy because of a lack of transparency. Therefore this study employs the logit model in determining the factors likely to lead to a choice of monetary policy transparency in Sub-Saharan Africa. The results reveal that only four variables; (current account, real output, financial depth and trade openness) out of seven independent variables are the determinants of transparency in Sub-Saharan Africa. The other variables, real interest rate, consumer price index and GDP growth are found to be statistically insignificant.