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Working Paper 108 - Is there a Case for Formal Inflation Targeting in Sub-Saharan Africa?

08-mai-2010

Inflation targeting is increasingly seen as the ‘best practice’ for central bank policy in many economies around the world, including a growing number of developing countries. To date, inflation targeting has not made inroads into African economies, with only Ghana and South Africa having formally adopted this policy regime. However, as the practice of inflationtargeting spreads, it raises a number of questions for African countries. Is an inflation-targeting regime the right approach to monetary policy, if the long-run goal is to support economic development and to reduce poverty? Can inflation targeting adapt to the structural realities of African economies? What are some of the potential pitfalls to inflation targeting? Are there viable alternatives? This paper grapples with these questions and raises a number of pertinent issues that should be taken into account in choosing the right monetary policy regime for longrun growth and development in Africa.

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