African Central Banks Research Articles

The nexus among digital financial inclusion, monetary policy transmission, and economic development in Sub-Saharan Africa

This paper aims to examine the complex relationship between digital financial inclusion, monetary policy transmission, and economic development in 18 Sub-Saharan African countries from 2004 to 2021. The study utilizes panel data and employs a digital financial inclusion index, broad money growth, and real gross domestic product per capita as proxies for digital financial inclusion, monetary policy transmission, and economic development, respectively. The panel autoregressive distributed lag model results uncover a bi-directional causality between economic development and digital financial inclusion, emphasizing the pivotal role of digital financial inclusion in fostering economic development. Additionally, another bi-directional causality between digital financial inclusion and monetary policy transmission highlights their interdependence. Unidirectional causality from monetary policy transmission to economic development is also established. This study emphasizes the crucial role of robust measures in enhancing digital financial inclusion to avert adverse consequences, offers nuanced insights into policy dynamics, particularly regarding inflation mitigation, and enhances monetary policy effectiveness. These findings underscore the importance of policy reform, legislation, and regulatory improvements to promote digital financial inclusion by Sub-Saharan African central banks. Strengthening rural financial infrastructure is crucial for driving digital financial inclusion, sustainable economic development, and reducing regional inequalities.

Monetary policy spillovers between the US and African Central Banks: A time- and frequency-varying connectedness study

This study investigates time and frequency connectedness between monetary policy in the US and 7 African countries to determine the extent to which US monetary policy influences policy conduct amongst African Central Banks. We use a time-varying parameter vector autoregressive (TVP-VAR) framework with frequencies to extract the spectral representation of the forecast error variance decompositions of the TVP-VAR and form 3 bands of frequency strata corresponding to long-run, medium-run and short-run. The results of the study are as follows: firstly, the static analysis shows that the US is the dominant transmitter of systemic shocks across all frequencies and the vulnerability of African countries as recipients of these shocks varies across frequency bands. Secondly, the dynamic analysis further reveals stronger short- and medium-run systemic connectedness during the periods of the Large Scale Asset Purchase programme and forward guidance policies whereas long-run connectedness is prominent during periods of US conventional monetary policy particularly in the COVID-19 era. The findings from the country-by-country dynamic spillover specifically show that countries which are more (less) responsive to US monetary policy shocks have lower (higher) inflation rates averages since the start of the pandemic. The findings suggest that African Central Banks can be benefit from higher coordination with the US Federal Reserve and we further propose that Central Banks worldwide in setting similar inflation targets.

New evidence from the monetary policy communication and inflation expectations nexus in Africa

Motivated by the dearth of evidence, we examine the impact of monetary policy communication on inflation expectations in Africa. Employing text-mining techniques to analyse the monetary policy statements of six African central banks, we compute a novel index of monetary policy communication (MPCI) using the extracted word counts, readability, sentiment and tone indicators. We provide new evidence of a positive and statistically significant impact of sentiments, tone and the MPCI on inflation expectations in Africa. Our results also reveal a rising influence of sentiments in anchoring expectations during the COVID-19 pandemic era. Our results are robust to alternative measures of inflation expectation and to global economic uncertainty. We recommend concise and lucid policy statements alongside statements with tone and policy decision consistency for anchoring inflation expectations. Furthermore, investors should carefully analyse and respond to signals from central bank communication, incorporating these insights into their investment strategies and risk management practices.

Central Bank Independence: The Case of North African Central Banks

Abstract The independence of Central Banks is still considered to be a credibility factor in ensuring price stability. Thus, many central banks in transition countries have undergone a change in their statutes in order to achieve greater independence from governments. In this vein, within a decade, North African Central Banks have put in place a new institutional framework for their monetary policy. In this article, we will attempt to assess and measure the legal (de jure) and real (de facto) independence of these Central Banks (Morocco, Algeria, Libya, Tunisia, Egypt).

Foreign exchange market return spillovers and connectedness among African countries

This paper examines the foreign exchange return shock spillovers and network connectedness among African countries during crisis periods using (Diebold & Yilmaz, 2012; 2014; 2016) which is based on generalized VAR and network theory between June 2004 and June 2021. Overall, the study found a low system-wide spillover connectedness among African foreign exchange markets. However, the total systemic spillover index increased during the eurozone sovereign debt crisis followed by global financial crisis, indicating evidence of contagion effects. This offers good diversification opportunities in the African currency market during crisis periods. The study also found no significant evidence of spillover effects among African currencies. Nonetheless, the network connectedness analysis found a positive significant pairwise return spillovers from the South African rand, Moroccan dirham and the CFA francs to Botswana pula, and from Moroccan dirham to CFA francs and South African rand. Furthermore, the study found South African rand, Moroccan dirham and CFA francs as the most significant net-transmitter of return shocks to other currencies whiles the Kenyan shilling and Botswana pula are the net-receivers of return shocks from other currencies. These results have implications for African central banks interventions in stabilizing their exchange rates to facilitate intra and inter-African trade and for international portfolio investors in managing their foreign exchange risk exposures.

Board characteristics, auditing characteristics and audit report lag in African Central Banks

PurposeThe purpose of this paper is to examine the determinants of audit report lag in Sub-Saharan African Central Banks. In this case, the determinants were divided into two categories: independent variables and mediating variables. The independent variables, which were generated from board characteristics, included board size, board gender diversity, governor duality, audit committee size and audit committee meetings. The mediating variables were auditing characteristics and they comprised audit mandate, audit approach and audit quality.Design/methodology/approachThe study used data from 192 observations from African Central Banks' financial reports for the period 2000–2016. The data collected were analyzed using path analysis, whereby four regression models were run and tested simultaneously. From the analysis, the study determined total effects and then decomposed the total effects into direct and indirect effects.FindingsThe study results indicate that in the case of board characteristics, governor duality and audit committee size were found to have a positive influence on audit report lag. In the case of audit quality, only audit mandate was found to have a negative influence on audit quality in the Central Banks. However, the introduction of mediating variables increased the positive effect of governor duality and audit committee size, while also making board size and board gender diversity have a significant negative effect on audit report lag.Practical implicationsThe findings of this paper have implications for the practice and policy of the auditing and governance of Central Banks, which includes designing appropriate governance structures as well as proper auditing strategies.Originality/valueThis is the first study which has examined factors influencing audit report lag in Central Banks. Previous studies on Central Banks' governance have examined the independence and autonomy of the Central Banks, as well as their accounting. This paper extends prior studies by examining the effects of those factors. Another contribution is the study's application of auditing characteristics as mediating variables.

The Politics of Finance: How Capital Sways African Central Banks

While there is a large literature on the politics of central banking its insights are difficult to translate to sub-Saharan Africa. This article addresses gaps in this literature by considering how the interests of those who control financial resources sway African central banks. Case studies of Kenya, Nigeria and Uganda demonstrate that variation in the sources of capital on which countries rely to finance investment helps to account for the pattern of variation in central bank policy stances. The analysis further develops and probes arguments about power derived from the control of capital in the context of developing countries.

African Central Banks – Abuja Meeting

Africa Research Bulletin: Economic, Financial and Technical SeriesVolume 53, Issue 8 p. 21394B-21394B Policy and Practice African Central Banks – Abuja Meeting First published: 03 October 2016 https://doi.org/10.1111/j.1467-6346.2016.07245.xRead the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat No abstract is available for this article. Volume53, Issue8October 2016Pages 21394B-21394B RelatedInformation

The Politics of Central Banking and Implications for Regulatory Reform in Sub-Saharan Africa: The Cases of Kenya, Nigeria and Uganda

As regulators, central banks can play a stabilising role, using prudential regulation to ensure financial system stability, and a transformative role, using regulation to promote financial system development and so encourage financial deepening and inclusion. While there are strong arguments for central banks seeking to strike a balance between their stabilising and transformative roles in financial regulation, African central banks have had difficulties in this respect. This paper presents case studies from Nigeria, Uganda and Kenya that show how central banks have historically tended to emphasise one role rather than the other. Reforms that seek to improve the balance between the stabilising and transformative roles of central banks in financial regulation are difficult because interest groups with the power to shape central bank behaviour tend to prefer the regulatory status quo and may try to capture regulatory reform processes. As facilitators of financial reform processes in many African countries, donors should systematically address the challenges posed by regulatory capture with a view to maximising the effectiveness of their support for regulatory reforms.

Protocol on the Establishment of the African Monetary Fund & Statute of the African Monetary Fund

On June 27, 2014, at the 23rd Ordinary Session of the Summit of the African Union held in Malobo, Equatorial Guinea, member states of the Africa Union adopted the Protocol on the Establishment of the African Monetary Fund (Fund). Plan for the Fund is not new but dates back to the 1963 Charter of the Organization of African Unity (the predecessor to the Africa Union) as well as to the 1991 Abuja Treaty—the agreement that established the African Economic Community and put in place a framework for continental integration. The Constitutive Act of the African Union (Constitutive Act) adopted in 2000 also envisaged the establishment of the Fund. Annexed to the Protocol is the Statute of the African Monetary Fund (Statute). As envisioned in the Abuja Treaty, the Fund, together with continental institutions such as the Africa Investment Bank and the African Central Bank that are still in the pipeline, are critical to efforts to create a continental economic and monetary union in Africa.

Central Banking in Sub-Saharan Africa: Introduction and Overview

African central banks have covered an extraordinary distance since the early 1990s—closing the gap, in the process, between their own policy challenges and those of richer-country central banks. Some striking differences are nonetheless easily missed, amid the many parallels between central banking reforms in Sub-Saharan Africa (SSA) and those in the industrial and emerging-market economies. The abandonment of soft pegs in low-income SSA, for example, had less to do with capital mobility than with the failures of exchange control systems under pressure from fiscal imbalances and external shocks. Fiscal and quasi-fiscal demands, in turn, have almost certainly been more important than conventional stabilisation objectives as potential sources of inflation bias in SSA. Money-based disinflation programmes, to take a final example—often supported by tight fiscal rules under IMF conditionality—do not appear to have involved costly sacrifices of output, outside of South Africa. These observations, and more in the papers collected here, suggest that the distinctive structural and institutional features of low-income countries may have distinctive implications for the design and conduct of monetary policy. Collectively, the papers in this volume issue a compelling call for monetary policy research that focuses squarely on the economic environment of low-income Africa.

Monetary autonomy in the West African countries: What do the policy rules tell us?

This paper provides an empirical assessment about how the monetary policy has been made in a group of Sub-Saharan African countries that are members of the CFA Franc zone. We question the argument that being a member of the CFA zone has always implied the loss of monetary policy autonomy. We use two definitions of monetary autonomy. In a first sense, we consider the African central bank's' ability to set their policy instruments endogenously, in regard to the local economic situations prevailing in the CFA zone, and not only in accordance with the monetary policy followed by the anchor zone. In a second sense, we interpret autonomy in a narrow sense, meaning that money creation is backed by the inflow of foreign exchange reserves as is usually the case for a currency board. These two definitions are used alternatively to test the hypothesis of monetary autonomy through the estimations of an interest rate and credit growth rules. We focus our attention on the West African Economic and Monetary Union (WAEMU) countries, where the upholding of the CFA zone is today passionately debated among the economists. Our results suggest a mixed evidence of autonomy. On the one hand, by considering the interest rate instrument, we provide some evidence that the BCEAO did not completely import its interest rate policy from France and the Euro zone, up until the 1994 devaluation. In addition to the Bank of France's discount rate and the inflation differential with Europe, the domestic interest rate has also been fixed in regard to variables such as growth, the real exchange rate and changes in foreign reserves. Until 1994, there seems however to be strong signs of loss of autonomy. On the other hand, we examine the responsiveness of credit planning to changes in foreign reserves and conclude against the hypothesis of autonomy over the whole period. Even more, credit policy has become more restrictive since the 1994 devaluation. Copyright © 2009 John Wiley & Sons, Ltd.

African Central Bank HQ To be in Abuja

African Central Bank HQ To be in Abuja

Banking harmonisation in the African context

This paper assesses the legislative framework for banking harmonisation in the proposed West African Monetary Union and its impact on the success of the monetary union. It provides a critical assessment of the legislative framework for banking harmonisation in the proposed monetary union. It finds that the current regional framework is inadequate and does not take account of the current state of development of the banking markets in the member states. It proposes that the regional framework should be revised to take a more pragmatic approach that would facilitate a harmonised system for banking regulation in the proposed West African Central Bank.

Banking Market Integration in the SADC Countries: Evidence from Interest Rate Analyses

This paper investigates the state, development and drivers of banking market integration in the member countries of the Southern African Development Community (SADC) by employing interest rate data. We first conduct a principal component analysis and find evidence for both increasing monetary integration and banking integration in loan and deposit markets. These integration processes are not developing uniformly and we can identify a convergence club. As banking market integration can be a genuine process or simply be driven by monetary integration, we also investigate the interest rate pass through from national and South African Central bank interest rates onto national retail rates. With respect to the convergence club we find both, genuine and monetary-integration driven processes though the latter dominate. We conclude that a selective expansion of the Common Monetary Area is possible but needs to be complement by efficient financial development policies.

AFRICAN CENTRAL BANKS: New Barclays Initiative

Africa Research Bulletin: Economic, Financial and Technical SeriesVolume 44, Issue 1 p. 17258A-17258A AFRICAN CENTRAL BANKS: New Barclays Initiative First published: 07 March 2007 https://doi.org/10.1111/j.1467-6346.2007.00748.xRead the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat No abstract is available for this article. Volume44, Issue1March 2007Pages 17258A-17258A RelatedInformation

Exchange Rate Policy and the Management of Official and Private Capital Flows in Africa

During the 1990s a number of African central banks succeeded in bringing inflation to relatively low levels while maintaining a market-determined exchange rate. These central banks were generally reluctant to fully subordinate exchange rate targets to monetary targets, however, particularly in the face of large external shocks. We focus on the management of highly persistent shocks to aid flows, including PRSP-related increases in net flows, in the presence of currency substitution by the domestic private sector. Such shocks have beneficent long-run effects, but when currency substitution is high they can produce dramatic macroeconomic management problems in the short run. What is the appropriate mix of money and exchange rate targeting in such cases, and the role of temporary sterilization? We analyze these and related issues in an intertemporal optimizing model that allows a portion of aid to be devoted to reducing the government's seigniorage requirement. This creates a strong link between official aid flows and private capital flows, giving rise to tradeoffs reminiscent of the literature on private capital inflows in emerging markets. When the credibility of policymakers' commitment to low inflation is firm, some degree of dirty floating, with little or no sterilization of increases in the monetary base, is the most attractive approach.

Monetary Policy Rules, Asset Prices, and Exchange Rates

During the 1990s a number of African central banks succeeded in bringing inflation to relatively low levels while maintaining a market-determined exchange rate. These central banks were generally reluctant to fully subordinate exchange rate targets to monetary targets, however, particularly in the face of large external shocks. We focus on the management of highly persistent shocks to aid flows, including PRSP-related increases in net flows, in the presence of currency substitution by the domestic private sector. Such shocks have beneficent long-run effects, but when currency substitution is high they can produce dramatic macroeconomic management problems in the short run. What is the appropriate mix of money and exchange rate targeting in such cases, and the role of temporary sterilization? We analyze these and related issues in an intertemporal optimizing model that allows a portion of aid to be devoted to reducing the government's seigniorage requirement. This creates a strong link between official aid flows and private capital flows, giving rise to tradeoffs reminiscent of the literature on private capital inflows in emerging markets. When the credibility of policymakers' commitment to low inflation is firm, some degree of dirty floating, with little or no sterilization of increases in the monetary base, is the most attractive approach.

African Centre for Monetary Studies and Association of African Central Banks, Debt Conversion Schemes in Africa: lessons from the experience of developing countries. London: James Currey, and Portsmouth, N.H.: Heinemann, 1992, 143 pp., £11.95, ISBN 0 85255 138 X paperback.

African Centre for Monetary Studies and Association of African Central Banks, Debt Conversion Schemes in Africa: lessons from the experience of developing countries. London: James Currey, and Portsmouth, N.H.: Heinemann, 1992, 143 pp., £11.95, ISBN 0 85255 138 X paperback.

Book Reviews

Book reviewed in this article: Structural Adjustment and the Environment. Edited by David Reed, WWF‐International South‐South Trade Preferences: The GSTP and Trade in Manufactures. Edited by Hans Linnemann. Indo‐Dutch Studies on Development Alternatives 9. New Delhi The Changing Geography of China. By Frank Leeming. Institute of British Geographers Studies in Geography The CGIAR in Transition: Implications for the Poor, Sustainability and the National Research Systems. By Helle Munk Ravnborg The Nature of Development – A Report from the Rural Tropics on the Quest for Sustainable Economic Growth. By Roger D. Stone Reformism and Revisionism in Africa's Political Economy in the 1990s: The Dialectics of Adjustment. By Timothy M. Shaw Liberalizing Tanzania's Food Trade: Public and Private Faces of Urban Marketing Policy 1939–1988. By Deborah Fahy Bryceson Technological Innovation and Third World Multinationals. By Paz Estrella E. Tolentino Instruments of Economic Policy in Africa. London and Dakar: James Currey with the African Centre for Monetary Studies and the Association of African Central Banks Debt‐Conversion Schemes in Africa: Lessons from the Experience of Developing Countries. London and Dakar: James Currey with the Association of African Central Banks Going‐it Alone: Female‐headed Households, Rights and Resources in Rural Bangladesh. By David J. Lewis with Marion Glaser, J. Allister McGregor, Sarah C. White and Geoffrey D. Wood International Current Awareness Services (ICAS): Economics, Political Science, Anthropology, Sociology. Compiled by the British Library of Political and Economic Science, London School of Economics The European Community and the Developing Countries. By Enzo R. Grilli Privatization and Liberalization in the Middle East. Edited by Iliya Harik and Denis J. Sullivan Economic Progress and Prospects in the Third World: Lessons of Development Experience since 1945. By H. W. Singer and Sumit Roy Trading with South Africa: The Policy Options for the EC. By Sheila Page and Christopher Stevens