PUBLICATIONS

@article{Asongu_679,
author = {Simplice A Asongu},
url = {http://dx.doi.org/10.1108/IGDR-12-2012-0048},
doi = {10.1108/IGDR-12-2012-0048},
year = {2014},
date = {2014-10-15},
journal = {Indian Growth and Development Review},
volume = {7},
number = {2},
pages = {142 - 180},
abstract = {Purpose
– The purpose of this paper is to examine the effects of monetary policy on economic activity using a plethora of hitherto unemployed financial dynamics in inflation-chaotic African countries for the period of 1987-2010.Although in developed economies, changes in monetary policy affect real economic activity in the short-run, but only prices in the long-run, the question of whether these tendencies apply to developing countries remains open to debate.

Design/methodology/approach
– Vector autoregresion (VARs) within the frameworks of Vector Error Correction Models and simple Granger causality models are used to estimate the long- and short-run effects, respectively. A battery of robustness checks are also used to ensure consistency in the specifications and results.

Findings
– The tested hypotheses are valid under monetary policy independence and dependence, except few exceptions. H1: Monetary policy variables affect prices in the long-run but not in the short-run. For the first-half (long-run dimension) of the hypothesis, permanent changes in monetary policy variables (depth, efficiency, activity and size) affect permanent variations in prices in the long-term. But in cases of disequilibriums, only financial dynamic fundamentals of depth and size significantly adjust inflation to the cointegration relations. With respect to the second-half (short-run view) of the hypothesis, monetary policy does not overwhelmingly affect prices in the short-term. Hence, but for a thin exception, H1 is valid. H2: Monetary policy variables influence output in the short-term but not in the long-term. With regard to the short-term dimension of the hypothesis, only financial dynamics of depth and size affect real gross domestic product output in the short-run. As concerns the long-run dimension, the neutrality of monetary policy has been confirmed. Hence, the hypothesis is also broadly valid.

Practical implications
– A wide range of policy implications are discussed. Inter alia: the long-run neutrality of money and business cycles, credit expansions and inflationary tendencies, inflation targeting and monetary policy independence implications. Country-/regional-specific implications, the manner in which the findings reconcile the ongoing debate, measures for fighting surplus liquidity and caveats and future research directions are also discussed.

Originality/value
– By using a plethora of hitherto unemployed financial dynamics (that broadly reflect monetary policy), we provide significant contributions to the empirics of money. The conclusion of the analysis is a valuable contribution to the scholarly and policy debate on how money matters as an instrument of economic activity in developing countries},
keywords = {Africa, Banking, inflation, Monetary policy, Output effects, VECM},
pubstate = {published},
tppubtype = {article}
}