The relative positive economic growth experienced by most African countries in the recent
decade has come with insufficient demand stimulation. The concern of poverty at the
forefront of economic policy, the need for inclusive growth and sustainable development,
inter alia, brings forward the inevitable question of the monetary policy responsibility.
Accordingly, the monetarist theory that focuses on price stability inherently neglects the
demand stimulation aspect of economic prosperity.
Since the mid 1980s, the monetarist school driven by its central aim of fighting inflation
and maintaining credibility in markets and economic agents has been priority for monetary
authorities (especially in Africa). To this effect, while good results in terms of inflation
targeting has been achieved in many African countries; economic growth has sometimes
been low. Hence, in light of the above, using a statistical and theoretical debate method,
the Credible Monetary Policy (CMP) paradox is traceable to Africa. Accordingly, with the
promising economic environment in Africa, we recommend the promotion of a monetary
policy oriented toward improving economic growth under the constraint of price stability.
In light of the above view, there are some note worthy signs such the recent decision by
the two CFA zone central banks to either maintain interest rates at a low level or reduce
it despite tightening measures of monetary policy taken by the European Central Bank
(ECB) earlier in the year. In the same vein, the central bank of South Africa has maintained
its policy of low interest rates with an objective of economic expansion.
Since, the 2008 financial crisis, the consolidation of the Federal Reserve’s declared final
objective of lowering interest rates and making emergency loans is an eloquent example
to reassure African central banks in the choice of the pro-growth monetary policy option.
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