The relative importance of monetary and fiscal policies in selected African countries

This paper examines the relative importance of monetary and fiscal policies in ten African countries using a trivariate vector autoregressive (VAR) model. The analysis is undertaken with annual data from 1960 to 1990 in logarithms first difference form. In five of the ten countries, our empirical results support the monetarist position that monetary policy is more important than fiscal policy. On the other hand, the Keynesian position that fiscal policy is more important than monetary policy is confirmed in the other five countries of the sample. The results of this study suggest that a particular economic philosophy cannot be generalized for African countries. These results may therefore prove useful not only to policy-makers but also to those interested in building macroeconomic models which may have implications for aggregate-demand management.