CENTRAL BANK POLICY, THE MACROECONOMIC TRILEMMA, AND INCLUSIVE GROWTH IN SUB-SAHARAN AFRICA

Abstract

Purpose. This study examines the impact of central bank policies on inclusive growth through the Mundell-Fleming trilemma framework in selected Sub-Saharan African countries. It aims to assess how monetary independence and capital mobility jointly influence inclusive economic growth in developing economies.

Design/methodology/approach. The study employs the Panel Autoregressive Distributed Lag (PARDL) model to estimate both short-run and long-run relationships using panel data from ten Sub-Saharan African countries over the period 1995–2024. The methodology captures equilibrium adjustments while accounting for country-level heterogeneity.

Findings. The empirical results reveal a statistically significant positive interaction between free capital mobility (FCM) and monetary independence (MI), indicating that these factors jointly promote inclusive growth. The findings provide empirical support for the Mundell-Fleming trilemma, demonstrating that the effectiveness of independent monetary policy depends on the degree of capital mobility in Sub-Saharan African economies. The study suggests that coordinated monetary policy and capital account management can enhance inclusive economic development.

Originality. This study extends the literature on the Mundell-Fleming trilemma by providing recent empirical evidence from Sub-Saharan Africa using a long-term panel dataset and the PARDL approach. It offers new insights into the interaction between monetary policy independence and capital mobility, highlighting their combined role in fostering inclusive growth and providing policy recommendations for central banks in developing economies.

Keywords: macroeconomic, exchange rate, economic growth, moneatary policy,capital movement