Has Policy Rate Been an Effective Tool in Taming Inflation?

Abstract

This paper explores the effectiveness of monetary policy rate as a tool to tame Inflation in sub-Saharans Africa using the systems GMM and other econometric approaches. Financial data (unconsolidated) from Orbis for the period 2011-2018 was used for the purpose of this study. We find that expected Inflation, GDP growth rate, unemployment, Exchange rate, broad money supply, and policy rate significantly influence the inflation rate in SSA. To the margin that the monetary policy rate has the most substantial impact on Inflation in the region and that re-evaluating monetary policy design could help control Inflation. The paper concludes that the credibility and accountability of the monetary policy authorities should be improved by setting targets appropriate to their institutional capacity and meeting them.