The Impact Of Inflation Targeting (IT) On Monetary Policy In Sub-Sahara Africa (SSA):Synthetic Control Approach

Inflation targeting(IT)has proven to be an efficient monetary policy in countries which have adopted it;both developed and developing countries.This study examines the concerns of whether Inflation Targeting is effective in controlling inflation and improving GDP growth in sub-Sahara Africa(SSA)using nonexperimental evaluation approach.To be precise,the study adopts Synthetic Control Method to evaluate the effect of Inflation Targeting on controlling inflation in 12 targeted countries in sub-Sahara Africa from 1998-2018.In order to have a clear indication of the findings,placebo effect test was also conducted to measure the impact of the IT.Also,the study employed regression analysis to examine the impact of inflation on the GDP growth performance in the targeted economies in SSA by assessing the relationship between GDP growth and Inflation in the targeted countries.The findings show that IT policy tool has significantly helped South Africa,Ghana,Democratic Republic of Congo and Zambia to reduce inflation.The remaining countries except Nigeria have experienced a reduction in their inflation after the adoption of the IT which indicate that IT is effective in the said targeted countries.Secondly,the findings from the regression analysis test show that inflation has significant negative impact on GDP performance in Ghana,Democratic Republic of Congo and Tanzania which indicate that IT could have positive impact on GDP growth with proper management of the policy tool with less practice of conventional banking system.The remaining targeted countries in SSA show that inflation has insignificant impact on GDP growth which posit that low inflation from IT policy tool shall have less impact to GDP growth.In a nutshell,the study recommends that countries in Sub Saharan Africa should ensure independence of the Central Bank,transparency and adherence to pre-conditions before inflation targeting is adopted.This is critical,because it establishes the real impact of the inflation targeting in the long run.