The causes and consequences of central bank money supply decisions: Evidence from Africa

The link between government borrowing, monetary expansion and inflation in several African countries is explored. It appears that although in the long run almost all government debt is monetized, monetary expansion is cushioned from short run variability in government borrowing and hence the rate of growth of prices is more stable than would otherwise be the case. Some central banks are better at cushioning the money supply than others, and the paper provides and explores the mechanisms which account for this difference.