The Asymmetric Transmission of Monetary Policy to Price Stability in Sub-Saharan Africa: A Non-Linear Panel ARDL Approach
DOI:
https://doi.org/10.31384/jisrmsse/2026.24.1.2Keywords:
Asymmetric Monetary Policy, Price Stability, Sub-Saharan Africa, Non-linear Panel ARDLAbstract
This study investigates the asymmetric relationship between monetary policy instruments and price stability for a panel of 39 Sub-Saharan African countries for the period 1995 to 2024. The study starts from the counter-intuitive premise of asymmetric policy effects and uses a sophisticated Non-linear Panel Autoregressive Distributed Lag (N-PARDL) model estimated by the Pooled Mean Group (PMG) estimator, with results compared to the Pooled Mean Group (PMG) and Dynamic Fixed Effects (DFE) estimators, which capture both short- and long-run asymmetries in the interest rate-inflation nexus. The methodological approach allows for the monetary policy rate to be decomposed into parts – positive (tightening) and negative (easing) – to examine the asymmetric transmission in detail. Empirical results reveal significant asymmetry in both temporal dimensions. The results are robust to comprehensive post-estimation diagnostics, including cross-sectional dependence tests, panel serial correlation tests, panel heteroscedasticity tests, panel stability tests, and a robustness check using an alternative inflation measure. Caution should be taken in interpreting the results as causal effects, as the policy rate can be endogenous. Such results call into question the linear policy paradigm and show the need for central banks in SSA to be more flexible and asymmetric in their policymaking.
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