| Abstract: |
This paper's objective is to analyse the role of fiscal policies and the
exchange rate regime in the effect of terms of trade shocks on growth
volatility in SSA. To achieve this objective, we use an estimation technique
based on instrumental variables (2SLS) for a sample of 44 sub-Saharan African
countries covering the period spanning 1980 to 2020. The results show that
terms of trade shocks as well as discretionary policy contribute to growth
volatility in sub-Saharan Africa. However, fiscal rules reduce the effects of
terms of trade shocks and discretionary policy volatility on growth
volatility. Furthermore, exchange rate regime fixity tends to positively
affect growth volatility. This result implies the need for sub-Sahara African
countries to consider fiscal policies, and the nature of the exchange rate
regime in their resilience and volatility reduction strategy. |