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Central banks and debt: emerging risks to the effectiveness of monetary policy in Africa?

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BIS Working Papers

No 99

 

Central banks and debt: emerging risks to the effectiveness of monetary policy in Africa?

by Benedicte Vibe Christensen and Jochen Schanz

 

Monetary and Economic Department

October 2018

 

JEL classification: demography, ageing, inflation, monetary policy

Keywords: E31, E52, J11

 

This publication is available on the BIS website (www.bis.org).

 

© Bank for International Settlements 2017. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated.

ISSN 1020-0959 (print)

ISSN 1682-7678 (online)

 

Central banks and debt: emerging risks to the effectiveness of monetary policy in Africa?

Benedicte Vibe Christensen and Jochen Schanz

Introduction

The last two decades have seen some major changes in the size and composition of debt in African countries. The relief of part of the public sector's external liabilities since the early 2000s lowered the level of outstanding debt in low-income countries to sustainable levels. However, in the 2010s, debt levels started to rise again. Initially, the increase reflected favourable external financing conditions on the back of higher commodity prices and improved terms of trade. Yet, when the tide turned and commodity prices started to fall again in 2014, debt continued to rise in many countries as fiscal spending exceeded subsiding revenues. Thus, debt has become an issue of conce

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