| Abstract: |
The relative positive economic growth experienced by most African countries in
the recent decade has come with insufficient demand stimulation. The concern
of poverty at the forefront of economic policy, the need for inclusive growth
and sustainable development, inter alia, brings forward the inevitable
question of the monetary policy responsibility. Accordingly, the monetarist
theory that focuses on price stability inherently neglects the demand
stimulation aspect of economic prosperity. Since the mid 1980s, the monetarist
school driven by its central aim of fighting inflation and maintaining
credibility in markets and economic agents has been priority for monetary
authorities (especially in Africa). To this effect, while good results in
terms of inflation targeting has been achieved in many African countries;
economic growth has sometimes been low. Hence, in light of the above, using a
statistical and theoretical debate method, the Credible Monetary Policy (CMP)1
paradox is traceable to Africa. Accordingly, with the promising economic
environment in Africa, we recommend the promotion of a monetary policy
oriented toward improving economic growth under the constraint of price
stability. In light of the above view, there are some note worthy signs such
the recent decision by the two CFA zone central banks to either maintain
interest rates at a low level or reduce it despite tightening measures of
monetary policy taken by the European Central Bank (ECB) earlier in the year.
In the same vein, the central bank of South Africa has maintained its policy
of low interest rates with an objective of economic expansion. Since, the 2008
financial crisis, the consolidation of the Federal Reserve’s declared final
objective of lowering interest rates and making emergency loans is an eloquent
example to reassure African central banks in the choice of the pro-growth
monetary policy option. |