Monetary policy for small emerging market economies: the way forward

Abstract

Discretionary monetary policy for small emerging market economies, especially in Sub-Saharan Africa, can benefit from closer scrutiny and strengthening through appropriate and incremental policies. Field research and related analysis challenge the conventional wisdom on the relationship between interest rates and inflation. Lessons learned suggest that monetary policy needs to be tempered to prevailing social, cultural, and socio-economic factors. In addition, access to credit through financial inclusion policies and programmes needs to be addressed, and the overarching role of good governance cannot be overlooked. Given the broad scope of weaknesses inherent in monetary policy-making (and the systems that support it) in small emerging market economies such as Botswana's, two options are available to tackle the problems: either monetary union should be adopted or incremental new directions to the status quo are required.

Keywords:

• monetary policy
• small emerging market economies
• Sub-Saharan Africa
• monetary union
• social and cultural factors