The African Development Institute (EADI) and the African Development Bank held a seminar in Tunis on 19 April on quantitative easing, a method of injecting money into the economy recently introduced by various central banks to deal with problems arising from the global financial crisis and resultant austerity programmes.
The delegates at the seminar, entitled “The Domestic and International Effects of Quantitative Easing: Lessons from Japan.” generally agreed that the policy yielded positive outcomes in terms of restoring economic growth and preventing possible recession.
African Development Institute Director, Professor Victor Murinde, opened the consultations and said the theme was current and timely and in line with the current consultations taking place on the formulation of the AfDB’s Long Term Strategy for 2013 to 2022.
He also emphasized the management’s commitment to strengthen its relationships with the academic community in the AfDB’s policy of contribution to development knowledge in Africa and the rest of the world.
Professor Murinde also noted the contribution that Japan had made to development in Africa over the years.
Professor Eric Girardin, of France's Aix-Marseille University and also member of the Asian Development Bank Institute Advisory Board, spoke on three issues related to quantitative easing.
They were the domestic effects on output and prices, the international effects on exchange rates, and the global effects on small open economies. The objective was to provide participants with the knowledge to assess the strengths and vulnerabilities of quantitative easy.
At the same time, the seminar provided AfDB staff with the opportunity for interactive discussion on the subject.
Drawing from concrete examples, the seminar sought to identify detailed steps applicable for addressing economic malaise in an economy. Professor Girardin drew lessons from Bank of Japan and covered the methodology and procedures it used between 2001 and 2006, in monitoring the effects of large-scale provision of liquidity to commercial banks.
The Japanese example was evidence that quantitative easing could have a positive effect on economic growth and the prevention of recession.
Taking the example of the AfDB’s regional member countries in Africa, and in particular Tunisia, the professor said the Tunisian Central Bank had used quantitative easing, among other policies, to manage the 2011 economic recession.
Professor Girardin said: “The Tunisian Central Bank injected 3.8 billion Tunisian dinars in January 2012, followed by almost the same amount during February and a third during March 2012.”
He noted: “By injecting a great dose of liquidity, quantitative encourages banks to lend, especially when inflation is relatively high, as in the case of Tunisia where the inflation rate was 5.4 percent in March 2012.”
Professor Girardin also affirmed that, following the outbreak of the global financial crisis in 2008 and the recession suffered by many countries, the QE approach had been adopted by the United States and the United Kingdom among other industrial countries.
Tunisia as a small open economy, feels the effects of quantitative implemented by large economies like the United States and Europe.
EADI division manager, Professor Temi Abimbola said: “This was an opportunity to fully understand the challenge of QE, and the unique role central banks can play in African competitive economies.”
Participants expressed satisfaction at the seminar, which was sponsored by the African Development Institute (EADI) and the Human Resources Management Department (CHRM).