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Covid-19 and the monetary-fiscal policy nexus in Africa

Author

Listed:
  • Christopher Adam
  • Enrique Alberola-Ila
  • Albert Pierres Tejada
Abstract
The Covid-19 pandemic reinforced the already close interactions between monetary and fiscal policies in Africa. Policymakers provided support to their economies in a coordinated way. Both policies were countercyclical and complementary. Central banks reacted more forcefully than fiscal authorities, as high debt constrained the fiscal response. The tighter fiscal-monetary policy nexus – while effective in facing the pandemic shock – presents risks for the future. The worsening fiscal situation represents a major challenge, not least for central banks. Against a backdrop of inflationary pressures and subdued recovery, political pressures could weigh on the management of monetary policy and generate tensions between policymakers. For central banks, reasserting the paramount importance of the goal of price stability is essential in order to reaffirm solid boundaries between fiscal and monetary policy, and to fend off fiscal dominance risks.

Suggested Citation

  • Christopher Adam & Enrique Alberola-Ila & Albert Pierres Tejada, 2022. "Covid-19 and the monetary-fiscal policy nexus in Africa," BIS Papers, Bank for International Settlements, number 121.
    • Handle: RePEc:bis:bisbps:121
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    References listed on IDEAS

    as
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    4. Catao, Luis A.V. & Terrones, Marco E., 2005. "Fiscal deficits and inflation," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 529-554, April.
    5. Ahmad, Ahmad Hassan & Aworinde, Olalekan B., 2019. "Are fiscal deficits inflationary in African countries? A new evidence from an asymmetric cointegration analysis," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    6. Yavuz Arslan & Mathias Drehmann & Boris Hofmann, 2020. "Central bank bond purchases in emerging market economies," BIS Bulletins 20, Bank for International Settlements.
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    Cited by:

    1. Lahlou, Kamal & Hajjaji , Saida, 2022. "Les déterminants de l’effort de relance en réponse à la crise de Covid-19," Document de travail 2022-4, Bank Al-Maghrib, Département de la Recherche.

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