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Soaring inflation in sub-Saharan Africa: A fiscal root?

The study investigates the effect of fiscal policy on the inflation rate in a panel of 44 sub-Saharan African (SSA) countries over the period 2003–2020 using a non-linear system generalized method of moments (system GMM) and the dynamic panel threshold estimation techniques. The results show that th...

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Autores principales: Olaoye, Olumide O., Omokanmi, O. J., Tabash, Mosab I., Olofinlade, S. O., Ojelade, M. O.
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Springer Netherlands 2023
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10198593/
https://www.ncbi.nlm.nih.gov/pubmed/37359961
http://dx.doi.org/10.1007/s11135-023-01682-z
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author Olaoye, Olumide O.
Omokanmi, O. J.
Tabash, Mosab I.
Olofinlade, S. O.
Ojelade, M. O.
author_facet Olaoye, Olumide O.
Omokanmi, O. J.
Tabash, Mosab I.
Olofinlade, S. O.
Ojelade, M. O.
author_sort Olaoye, Olumide O.
collection PubMed
description The study investigates the effect of fiscal policy on the inflation rate in a panel of 44 sub-Saharan African (SSA) countries over the period 2003–2020 using a non-linear system generalized method of moments (system GMM) and the dynamic panel threshold estimation techniques. The results show that the recent increase in inflation rate has a fiscal nature and that monetary policy alone may not provide an effective response. Specifically, the results indicate that a positive shock to fiscal policy (captured by public debts) has a positive and statistically significant effect on inflation, while a negative shock to public debt has a statistically non-significant impact on the inflation rate. Also, money supply exerted a positive and insignificant impact on inflation, indicating that the current inflation rate in the region may not be induced by money supply. However, the joint effect of public debts and money supply shows that public debts aid the effect of money supply on the inflation rate, albeit, not in the proportion predicted by the quantity theory of money. Further, the results also found a public debt threshold point of 60.59% of GDP. This implies the current inflationary pressure may be rooted in fiscal policy and that further accumulation of public debts beyond the benchmark established in the study would worsen the inflationary pressure in SSA. Importantly, the study found that for fiscal policy to spur growth and reduce inflationary pressure in SSA, the inflation rate should be managed and brought within a single-digit framework of 4%. The research and policy implications are discussed.
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spelling pubmed-101985932023-05-23 Soaring inflation in sub-Saharan Africa: A fiscal root? Olaoye, Olumide O. Omokanmi, O. J. Tabash, Mosab I. Olofinlade, S. O. Ojelade, M. O. Qual Quant Article The study investigates the effect of fiscal policy on the inflation rate in a panel of 44 sub-Saharan African (SSA) countries over the period 2003–2020 using a non-linear system generalized method of moments (system GMM) and the dynamic panel threshold estimation techniques. The results show that the recent increase in inflation rate has a fiscal nature and that monetary policy alone may not provide an effective response. Specifically, the results indicate that a positive shock to fiscal policy (captured by public debts) has a positive and statistically significant effect on inflation, while a negative shock to public debt has a statistically non-significant impact on the inflation rate. Also, money supply exerted a positive and insignificant impact on inflation, indicating that the current inflation rate in the region may not be induced by money supply. However, the joint effect of public debts and money supply shows that public debts aid the effect of money supply on the inflation rate, albeit, not in the proportion predicted by the quantity theory of money. Further, the results also found a public debt threshold point of 60.59% of GDP. This implies the current inflationary pressure may be rooted in fiscal policy and that further accumulation of public debts beyond the benchmark established in the study would worsen the inflationary pressure in SSA. Importantly, the study found that for fiscal policy to spur growth and reduce inflationary pressure in SSA, the inflation rate should be managed and brought within a single-digit framework of 4%. The research and policy implications are discussed. Springer Netherlands 2023-05-19 /pmc/articles/PMC10198593/ /pubmed/37359961 http://dx.doi.org/10.1007/s11135-023-01682-z Text en © The Author(s), under exclusive licence to Springer Nature B.V. 2023, Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law. This article is made available via the PMC Open Access Subset for unrestricted research re-use and secondary analysis in any form or by any means with acknowledgement of the original source. These permissions are granted for the duration of the World Health Organization (WHO) declaration of COVID-19 as a global pandemic.
spellingShingle Article
Olaoye, Olumide O.
Omokanmi, O. J.
Tabash, Mosab I.
Olofinlade, S. O.
Ojelade, M. O.
Soaring inflation in sub-Saharan Africa: A fiscal root?
title Soaring inflation in sub-Saharan Africa: A fiscal root?
title_full Soaring inflation in sub-Saharan Africa: A fiscal root?
title_fullStr Soaring inflation in sub-Saharan Africa: A fiscal root?
title_full_unstemmed Soaring inflation in sub-Saharan Africa: A fiscal root?
title_short Soaring inflation in sub-Saharan Africa: A fiscal root?
title_sort soaring inflation in sub-saharan africa: a fiscal root?
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10198593/
https://www.ncbi.nlm.nih.gov/pubmed/37359961
http://dx.doi.org/10.1007/s11135-023-01682-z
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