INFLATION UNCERTAINTY AND INFLATION: IMPLICATIONS OF ADJUSTMENT AND ECONOMIC RECOVERY PROGRAMS IN SUB-SAHARAN AFRICA

Abstract

We investigate the possible impact ofIMF and the World Banks economic programs on the two-way link between inflation and the uncertainty of inflation in three Sub-Saharan countries from 1964-2004. Causality test results show that in all three countries the nature and direction ofthe relationship between inflation and uncertainty of inflation changes with the varying economic regimes resulting from IMF and World Bank Policies. Ghana shows significant evidence ofthe Friedman-Ball hypothesis in all regimes except the adjustment period and Senegal confirm the Cukierman-Meltzer proposition in the pre-adjustment period. In Uganda, results in the pre-adjustment period suggest an inverse relationship between inflation and uncertainty. We find no evidence o f what Cukierman-Meltzer calls an opportunistic central banker during the adjustment period.