Monetary policy and inclusive social development in Africa: Evidence from instrumental variable quantile regressions
Keywords:
monetary policy, inclusive development, social inequalities, IV-QRAbstract
This study investigates whether monetary policy, beyond its conventional objective of price stability, contributes to inclusive social development in Africa. The analysis is based on a panel of African countries covering the period 2010–2022. To ensure robust inference, three complementary econometric techniques are employed: a fixed-effects model to control for country-specific heterogeneity, a two-stage least squares (2SLS) estimator to address endogeneity issues, and an instrumental-variable quantile regression (IV-QR) approach to examine potential variations across different levels of inclusive development. The results reveal that monetary policy exerts a positive and causal effect on inclusive human development. Specifically, higher banking liquidity, greater monetary depth, and increased real interest rate stability significantly improve the Inequality-Adjusted Human Development Index (IHDI). The IV-QR estimates indicate that these effects remain relatively stable across the distribution of inclusive development, suggesting limited heterogeneity among African countries. Additional analyses further show that monetary policy contributes to reducing social and income inequalities while enhancing overall human well-being. These findings highlight the importance of monetary policy as a macroeconomic instrument for promoting inclusive development rather than solely maintaining price stability. Strengthening macroeconomic stability, improving liquidity management, and fostering financial deepening therefore emerge as key policy priorities for advancing inclusive human development in Africa.
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