@workingpaper{Asongu2012bd,
title = {Fighting consumer price inflation in Africa. What do dynamics in money, credit, efficiency and size tell us?},
author = {Simplice A Asongu},
editor = {African 2012 Governance and Development Institute WP/12/011},
url = {http://www.afridev.org/RePEc/agd/agd-wpaper/Fighting-consumer-price-inflation-in-Africa.-What-do-dynamics-in-money-credit-efficiency-and-size-tell-us.pdf},
year = {2012},
date = {2012-09-01},
abstract = {Purpose – The purpose of this paper is to examine the effects of policy options in financial
dynamics (of money, credit, efficiency and size) on consumer prices. Soaring food prices have
marked the geopolitical landscape of African countries in the past decade.
Design/methodology/approach – We limit our sample to a panel of African countries for which
inflation is non-stationary. VAR models from both error correction and Granger causality
perspectives are applied. Analyses of dynamic shocks and responses are also covered. Six
batteries of robustness checks are applied to ensure consistency in the results.
Findings – (1) There are significant long-run equilibriums between inflation and each financial
dynamic. (2) When there is a disequilibrium, while only financial depth and financial size could
be significantly used to exert deflationary pressures, inflation is significant in adjusting all
financial dynamics. In other words, financial depth and financial size are more significant
instruments in fighting inflation than financial efficiency and activity. (3) The financial
intermediary dynamic of size appears to be more instrumental in exerting a deflationary tendency
than financial intermediary depth. (4) The deflationary tendency from money supply is double
that based on liquid liabilities.
Practical implications – Monetary policy aimed at fighting inflation only based on bank
deposits may not be very effective until other informal and semi-formal financial sectors are
taken into account. It could be inferred that, tight monetary policy targeting the ability of banks
to grant credit (in relation to central bank credits) is more effective in tackling consumer price
inflation than that, targeting the ability of banks to receive deposits. In the same vein, adjusting
the lending rate could be more effective than adjusting the deposit rate. The insignificance of
financial allocation efficiency and financial activity as policy tools in the battle against inflation
could be explained by the (well documented) surplus liquidity issues experienced by the African
banking sector.
Social implications – This paper helps in providing monetary policy options in the fight against
soaring consumer prices. By keeping inflationary pressures on food prices in check, sustainedcampaigns involving strikes, demonstrations, marches, rallies and political crises that seriously
disrupt economic performance could be mitigated.
Originality/value – As far as we have perused, there is yet no study that assesses monetary
policy options that could be relevant in addressing the dramatic surge in the price of consumer
commodities.},
keywords = {Banks; Inflation; Development; Panel; Africa},
pubstate = {published},
tppubtype = {workingpaper}
}

@workingpaper{Asongu2012b_33,
title = {Financial determinants of consumer price inflation. What do dynamics in money, credit, efficiency and size tell us?},
author = {Simplice A Asongu},
editor = {African 2012 Governance and Development Institute WP/12/019},
url = {http://www.afridev.org/RePEc/agd/agd-wpaper/Financial-determinants-of-consumer-price-inflation.pdf},
year = {2012},
date = {2012-01-01},
abstract = {Purpose – The purpose of this paper is to examine the effects of financial dynamic policy
options in money, credit, efficiency and size on consumer prices. Soaring food prices have
marked the geopolitical landscape of developing countries in the past few years.
Design/methodology/approach – The estimation approach used is a Two-Stage-Least Squares
Instrumental Variable technique. Instruments include: legal-origins; income-levels and religiousdominations.
The first-step consists of justifying the choice of the estimation approach with a
Hausman-test for endogeneity. In the second-step, we verify that the instrumental variables are
exogenous to the endogenous components of explaining variables(financial dynamic channels)
conditional on other covariates(control variables). In the third-step, the validity of the
instruments is examined with the Sargan overidentifying restrictions test. Robustness checks are
ensured by: (1) use of alternative indicators of each financial dynamic; (2) estimation with robust
Heteroscedasticity and Autocorrelation Consistent (HAC) standard errors; and (3) adoption of
two interchangeable sets of instruments.
Findings – Findings broadly reveal the following: (1) money(depth) and credit(activity) which
are in absolute measures have positive elasticities of inflation; while (2) financial efficiency and
size in relative measures have negative elasticities of inflation.
Social implications – This paper helps in providing monetary policy options in the fight against
soaring consumer prices. By keeping inflationary pressures on food prices in check, sustained
campaigns involving strikes, demonstrations, marches, rallies and political crises that seriously
disrupt economic performance could be mitigated.
Originality/value – As far as we have perused, there is yet no study that assesses monetary
policy options that could be relevant in addressing the dramatic surge in the price of consumer
commodities.},
keywords = {Banks; Inflation; Development; Panel; Africa},
pubstate = {published},
tppubtype = {workingpaper}
}