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ISSUES IN MONETARY POLICY RULE: LESSONS FROM ECOWAS 1 COUNTRIES

By Siri Alain

Abstract

This paper analyzes the reaction function of the Central Banks of Ghana, Nigeria and WAEMU. For that aim, interest rate policy rules have been estimated. Despite the declared use of indirect monetary policy management, the empirical evidence suggests that Ghana and Nigeria’s monetary policy are not consistent with the monetary policy rule according to the original Taylor formula or to its adjusted variants. The robustness test carried out using different inflation measurements, output gap, and estimation methods have not allowed to significantly improve the results of our first regressions. Interest rates weakly react to the variations of inflation and output gap. In the case of WAEMU, the central bank seems to apply a Taylor rule adjusted by the interest rate of France

Topics: Monetary policy, Taylor rule, interest rate. 1
Year: 2009
OAI identifier: oai:CiteSeerX.psu:10.1.1.192.5497
Provided by: CiteSeerX
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