Financial conditions help explain policy stance in Africa – IMF paper
Study says r* is not a sufficient guide to monetary policy when transmission mechanism is impaired
New research published by the International Monetary Fund uses a financial conditions index as a means of assessing the policy stance of central banks in sub-Saharan Africa.
The working paper first estimates the neutral real interest rate, sometimes known as r*, for 11 economies in the region. Authors Johanna Tiedemann, Olivier Bizimana and Shant Arzoumanian find the neutral rate has been declining in most of the sub-Saharan African countries, mirroring the trend in advanced and emerging
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