Monetary policies and economic management: Evidence from Sub-Saharan Africa

Published: Jan 24, 2024

Abstract:

Purpose: The objective of this paper is to empirically analyze the application of monetary policies for economic management in Sub-Saharan African countries. The study used time series data from two African countries, specifically Kenya and Rwanda to examine the effect of broad money on the Gross Domestic Product growth rate.

Research methodology: The study relied on secondary data; obtained from the World Bank Development Indicators database. The study analyzed the data using both descriptive and inferential statistical techniques. The hypothesis was tested using the Ordinary Least Squares (OLS) technique. The data were checked for normality and subjected to Unit Root tests using the Dickey-Fuller, Augmented Dickey-Fuller and Phillips-Perron text prior to further analysis.

Results: The results confirmed the stationarity of the data. The descriptive statistics showed that all variables were normally distributed. The OLS result showed that broad money growth had a positive statistically significant effect on the GDP growth rate of both countries.

Limitations: The study focused on two sub-Saharan African countries.

Contribution: This study explicates the fact that in order to have a robust financial system, which eventually results in sustainable economic development, solid monetary policies must be maintained.

Practical Implication: The implication of this study is the identification of how responsible, long-term fiscal and budgetary stance encourages economic growth.

Novelty: The study focuses on the application of monetary policies in the economic management of Sub-Saharan African countries; with a particular emphasis on Kenya and Rwanda. These two countries have recorded remarkable growth in Sub-Saharan Africa compared to other countries.

Keywords:
1. Broad money
2. Broad money growth
3. Consumer price index
4. GDP
Authors:
1 . Kanayo Chike Nwosu
2 . Ekwunife Gabriel Okafor
3 . Chinedu F. Egbunike
How to Cite
Nwosu, K. C., Okafor, E. G., & Egbunike, C. F. (2024). Monetary policies and economic management: Evidence from Sub-Saharan Africa. Journal of Governance and Accountability Studies, 3(2), 85–96. https://doi.org/10.35912/jgas.v3i2.1911

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References

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    Adegbite, T., & Alabi, W. (2013). Monetary policy and economic growth: The Nigerian experience (1970-2010). Prime Journal of Business Administration and Management, 3(1), 822-833.

    Adigwe, P., Echekoba, F., & Onyeagba, J. B. (2015). Monetary policy and economic growth in Nigeria: A critical evaluation. IOSR Journal of Business and Management (IOSR-JBM), 17(2), 110-119.

    Ahmad, M. M., & Dahalan, J. (2020). Not aid, but trade-an application of ARDL bound test for Pakistan economy. International Journal of Financial, Accounting, and Management, 2(1), 51-64.

    Anowor, O. F., & Okorie, G. C. (2016). A reassessment of the impact of monetary policy on economic growth: Study of Nigeria. International Journal of Developing and Emerging Economies, 4(1), 82-90.

    Aryadi, F., Ahadiat, A., & Ribhan, R. (2020). Financial performance of Bandar Lampung City Government (Comparing the accountability of two mayor periods: 2006–2010 vs 2011–2015). International Journal of Financial, Accounting, and Management, 2(3), 213-225.

    Azuh, D., Okorie, U. E., Gershon, O., Azuh, A. E., & Matthew, O. (2021). Economic and demographic effects of monetary policy instruments on growth. International Journal of Business and Globalisation, 28(3), 304-320.

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    Ebisine, L., & Oki, B. (2021). Monetary Policy and Domestic Private Investment in Nigeria. International journal of Multidisciplinary Research and Analysis, 4(7), 904-912.

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    Esperance, N., & Fuling, H. (2020b). EVALUATION OF THE ECONOMIC RELATIONSHIP BETWEEN INFLATION AND ITS DETERMINANTS IN RWANDA. European Journal of Economic and Financial Research.

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    Nairobi, N., Ambya, A., Afif, F. Y., & Pratikno, D. D. (2022). Ownership rights and ASEAN-5 economic growth. Studies in Economy and Public Policy, 1(1), 1-13.

    NBR. (2019). Monetary policy. Retrieved from https://www.bnr.rw/monetary-policy/

    Nga, N. (2021). Monetary policy, exchange rate, renewable energy and economic growth: An empirical analysis of Vietnam. Accounting, 7(6), 1315-1324.

    Njoroge, P., & Murinde, V. (2021). Reflections on Central Banking 50 Years of Central Banking in Kenya.

    Nkikabahizi, F. (2013). Monetary policy and economic growth in Rwanda.

    Nkikabahizi, F., Hategekimana, V., & Musabanganji, E. (2020). The Working of Monetary Policy Transmission Mechanisms in Rwanda: An Econometric Analysis Using the Equilibrium Model. Rwandan Economy at the Crossroads of Development: Key Macroeconomic and Microeconomic Perspectives, 55-71.

    Nwankwo, G. O. (1991). Money and Capital Markets in Nigeria Today: University of Lagos Press.

    Nwankwo, S. N., & Agbo, E. I. (2021). EFFECTS OF MONETARY POLICY MEASURES ON NIGERIA'S ECONOMIC GROWTH. Journal on Banking Financial Services & Insurance Research, 11(5), 12-27.

    Nwoko, N. M., Ihemeje, J., & Anumadu, E. (2016). The impact of monetary policy on the economic growth of Nigeria. African Research Review, 10(3), 192-206.

    Nyamongo, E., Maana, I., & Kamau, A. (2021). Dynamics of Monetary Policy in Kenya. 50 Years of Central Banking in Kenya, 281.

    Ogunjimi, S. (1997). Public Finance: For Polytechnics ICAN Students (Bida: Lekem Productions).

    Okafor, C., Oshoke, A. S., & Thomas, A. S. (2015). Monetary Policy Innovations and Growth Rate of Output in Nigeria. IIARD International Journal of Economics and Business Management, 1(4), 1-15.

    Olamide, E. G., & Maredza, A. (2021). The Short and Long Run Dynamics of Monetary Policy, Oil Price Volatility and Economic Growth in the CEMAC Region. Asian economic and financial review, 11(1), 78.

    Onyeiwu, C. (2012). Monetary policy and economic growth of Nigeria. Journal of Economics and Sustainable Development, 3(7), 62-70.

    Rusuhuzwa, T. K., & Rusuhuzwa, T. K. (2021a). Evolution of Monetary Policy Implementation in Rwanda. Monetary Policy in Rwanda: 1964—Present, 31-54.

    Rusuhuzwa, T. K., & Rusuhuzwa, T. K. (2021b). Monetary Transmission Mechanism in Rwanda. Monetary Policy in Rwanda: 1964—Present, 87-110.

    Sayinzoga, A., & Simson, R. (2006). Monetary policy in Rwanda: A cointegration analysis. South African Journal of Economics, 74(1), 65-78.

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    Statista. (2023b). Sub-Saharan Africa: Growth rate of real gross domestic product (GDP) from 2018 to 2028: Statista.

    Sule, A. (2022). Pass?Through effect of monetary policy tools on economic growth in Nigeria. Journal of Public Affairs, 22(3), e2588.

    Ubi-Abai, I., & Ekere, D. (2018). Fiscal policy, monetary policy and economic growth in Sub-Saharan Africa.

    Ufoeze, L. O., Odimgbe, S., Ezeabalisi, V., & Alajekwu, U. B. (2018). Effect of monetary policy on economic growth in Nigeria: An empirical investigation. Annals of Spiru Haret University, Economic Series, 9(1), 123-140.

    Victoria, A., Babajide, A., Akhanolu, I. A., & Tochukwu, O. (2016). Monetary policy and its effectiveness on economic development in Nigeria. International Business Management, 10(22), 5336-5340.

    Worldbank. (2023). World Development Indicators. Retrieved from https://databank.worldbank.org/source/world-development-indicators

    Xinhua. (2018). Rwanda central bank to change monetary policy to safeguard financial sector. Retrieved from http://www.xinhuanet.com/english/2018-12/21/c_137690074.htm

  1. Abeng, M. (2006). Financial sector reform outcomes in Nigeria: A quantitative evaluation. CBN Bullion, 30(2), 53-69.
  2. Adegbite, T., & Alabi, W. (2013). Monetary policy and economic growth: The Nigerian experience (1970-2010). Prime Journal of Business Administration and Management, 3(1), 822-833.
  3. Adigwe, P., Echekoba, F., & Onyeagba, J. B. (2015). Monetary policy and economic growth in Nigeria: A critical evaluation. IOSR Journal of Business and Management (IOSR-JBM), 17(2), 110-119.
  4. Ahmad, M. M., & Dahalan, J. (2020). Not aid, but trade-an application of ARDL bound test for Pakistan economy. International Journal of Financial, Accounting, and Management, 2(1), 51-64.
  5. Anowor, O. F., & Okorie, G. C. (2016). A reassessment of the impact of monetary policy on economic growth: Study of Nigeria. International Journal of Developing and Emerging Economies, 4(1), 82-90.
  6. Aryadi, F., Ahadiat, A., & Ribhan, R. (2020). Financial performance of Bandar Lampung City Government (Comparing the accountability of two mayor periods: 2006–2010 vs 2011–2015). International Journal of Financial, Accounting, and Management, 2(3), 213-225.
  7. Azuh, D., Okorie, U. E., Gershon, O., Azuh, A. E., & Matthew, O. (2021). Economic and demographic effects of monetary policy instruments on growth. International Journal of Business and Globalisation, 28(3), 304-320.
  8. Bank, T. W. (2019a). The World Bank In Kenya: Overview. Retrieved from https://www.worldbank.org/en/country/kenya/overview
  9. Bank, T. W. (2019b). The World Bank in Rwanda: Overview. Retrieved from https://www.worldbank.org/en/country/rwanda/overview
  10. Berg, A. (2018). Monetary policy in sub-saharan africa: Oxford University Press.
  11. CBN. (2006). Monetary Policy Series. Retrieved from https://www.cbn.gov.ng/Out/EduSeries/Series1.pdf
  12. Ebisine, L., & Oki, B. (2021). Monetary Policy and Domestic Private Investment in Nigeria. International journal of Multidisciplinary Research and Analysis, 4(7), 904-912.
  13. Egbunike, C. F., & Oranefo, P. C. (2023). Macroeconomic factor, firm characteristics and inventory holding in Nigeria: A quantile regression approach. International Journal of Financial, Accounting, and Management, 5(1), 1-17.
  14. Esperance, N., & Fuling, H. (2020a). Analysis of financial innovationsimplemented by National Bank of Rwandain line with its monetary policy. IOSR Journal of Economics and Finance (IOSR-JEF), 11(3), 52-56.
  15. Esperance, N., & Fuling, H. (2020b). EVALUATION OF THE ECONOMIC RELATIONSHIP BETWEEN INFLATION AND ITS DETERMINANTS IN RWANDA. European Journal of Economic and Financial Research.
  16. Fadiran, T. P. (2021). Monetary Transmission Mechanism, Oil Price Shocks and Economic Growth of Nigeria. Acta Universitatis Danubius. Œconomica, 17(1), 209-226.
  17. Fasanya, I. O., Onakoya, A. B., & Agboluaje, M. A. (2013). Does monetary policy influence economic growth in Nigeria? Asian economic and financial review, 3(5), 635.
  18. Folawewo, A. O., & Osinubi, T. S. (2006). Monetary policy and macroeconomic instability in Nigeria: A rational expectation approach. Journal of Social Sciences, 12(2), 93-100.
  19. Friedman, M. (1970). The counter-revolution in monetary theory Explorations in Economic Liberalism: The Wincott Lectures (pp. 3-21): Springer.
  20. Jhingan, M. L. (2000). Monetary and banking international trade: Vrinda Publications (P) Ltd.
  21. Joy, I. (2014). THE EFFECTIVENESS OF MONETARY POLICY IN RWANDA.
  22. Kamaan, C. K., & Nyamongo, E. (2014). The effect of monetary policy on economic growth in Kenya. International Journal of Business and Commerce, 3(8), 11-24.
  23. Kasekende, L., & Brownbridge, M. (2011). Post?crisis Monetary Policy Frameworks in sub?Saharan Africa. African Development Review, 23(2), 190-201.
  24. Kimani, G. W., & Maingi, J. (2021). Effect of Various Categories of Government Expenditure on Economic Growth in Kenya. International Journal of Current Aspects in Finance, Banking and Accounting, 3(1), 21-40.
  25. Maingi, J. N. (2017). The Impact of Government Expenditure on Economic Growth in Kenya: 1963-2008. Advances in Economics and Business, 5(12), 635 - 662.
  26. Medlimo, R. A., Septania, A. D., Hapsari, H. O., Zuleika, M. F., & Agustin, T. (2022). Measuring the future of NFT as digital asset in realizing economic revitalization. Annals of Justice and Humanity, 1(2), 59-67.
  27. Nairobi, N., Ambya, A., Afif, F. Y., & Pratikno, D. D. (2022). Ownership rights and ASEAN-5 economic growth. Studies in Economy and Public Policy, 1(1), 1-13.
  28. NBR. (2019). Monetary policy. Retrieved from https://www.bnr.rw/monetary-policy/
  29. Nga, N. (2021). Monetary policy, exchange rate, renewable energy and economic growth: An empirical analysis of Vietnam. Accounting, 7(6), 1315-1324.
  30. Njoroge, P., & Murinde, V. (2021). Reflections on Central Banking 50 Years of Central Banking in Kenya.
  31. Nkikabahizi, F. (2013). Monetary policy and economic growth in Rwanda.
  32. Nkikabahizi, F., Hategekimana, V., & Musabanganji, E. (2020). The Working of Monetary Policy Transmission Mechanisms in Rwanda: An Econometric Analysis Using the Equilibrium Model. Rwandan Economy at the Crossroads of Development: Key Macroeconomic and Microeconomic Perspectives, 55-71.
  33. Nwankwo, G. O. (1991). Money and Capital Markets in Nigeria Today: University of Lagos Press.
  34. Nwankwo, S. N., & Agbo, E. I. (2021). EFFECTS OF MONETARY POLICY MEASURES ON NIGERIA'S ECONOMIC GROWTH. Journal on Banking Financial Services & Insurance Research, 11(5), 12-27.
  35. Nwoko, N. M., Ihemeje, J., & Anumadu, E. (2016). The impact of monetary policy on the economic growth of Nigeria. African Research Review, 10(3), 192-206.
  36. Nyamongo, E., Maana, I., & Kamau, A. (2021). Dynamics of Monetary Policy in Kenya. 50 Years of Central Banking in Kenya, 281.
  37. Ogunjimi, S. (1997). Public Finance: For Polytechnics ICAN Students (Bida: Lekem Productions).
  38. Okafor, C., Oshoke, A. S., & Thomas, A. S. (2015). Monetary Policy Innovations and Growth Rate of Output in Nigeria. IIARD International Journal of Economics and Business Management, 1(4), 1-15.
  39. Olamide, E. G., & Maredza, A. (2021). The Short and Long Run Dynamics of Monetary Policy, Oil Price Volatility and Economic Growth in the CEMAC Region. Asian economic and financial review, 11(1), 78.
  40. Onyeiwu, C. (2012). Monetary policy and economic growth of Nigeria. Journal of Economics and Sustainable Development, 3(7), 62-70.
  41. Rusuhuzwa, T. K., & Rusuhuzwa, T. K. (2021a). Evolution of Monetary Policy Implementation in Rwanda. Monetary Policy in Rwanda: 1964—Present, 31-54.
  42. Rusuhuzwa, T. K., & Rusuhuzwa, T. K. (2021b). Monetary Transmission Mechanism in Rwanda. Monetary Policy in Rwanda: 1964—Present, 87-110.
  43. Sayinzoga, A., & Simson, R. (2006). Monetary policy in Rwanda: A cointegration analysis. South African Journal of Economics, 74(1), 65-78.
  44. Statista. (2023a). Sub-Saharan Africa: Gross domestic product (GDP) in current prices from 2018 to 2028: Statista.
  45. Statista. (2023b). Sub-Saharan Africa: Growth rate of real gross domestic product (GDP) from 2018 to 2028: Statista.
  46. Sule, A. (2022). Pass?Through effect of monetary policy tools on economic growth in Nigeria. Journal of Public Affairs, 22(3), e2588.
  47. Ubi-Abai, I., & Ekere, D. (2018). Fiscal policy, monetary policy and economic growth in Sub-Saharan Africa.
  48. Ufoeze, L. O., Odimgbe, S., Ezeabalisi, V., & Alajekwu, U. B. (2018). Effect of monetary policy on economic growth in Nigeria: An empirical investigation. Annals of Spiru Haret University, Economic Series, 9(1), 123-140.
  49. Victoria, A., Babajide, A., Akhanolu, I. A., & Tochukwu, O. (2016). Monetary policy and its effectiveness on economic development in Nigeria. International Business Management, 10(22), 5336-5340.
  50. Worldbank. (2023). World Development Indicators. Retrieved from https://databank.worldbank.org/source/world-development-indicators
  51. Xinhua. (2018). Rwanda central bank to change monetary policy to safeguard financial sector. Retrieved from http://www.xinhuanet.com/english/2018-12/21/c_137690074.htm