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Do central bankers' characteristics matter for Africa? Ethnic favoritism, fractionalization, and inflation

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  • Strong, Christine
  • Yayi, Constant L.

Abstract

Using a newly constructed dataset over the period 1984–2017 for 21 African countries, this study investigates the influence of central bankers' personal characteristics, including educational and professional backgrounds, as well as ethnic affiliation, on inflation. The central hypothesis posits that shared ethnic affiliation between the central banker and the head of the executive branch signals an alliance between monetary and fiscal authorities, suggesting a preference for a more accommodating central banker. The results strongly support the existence of ethnic favoritism, indicating that the impact of joint ethnicity on inflation is contingent on the level of ethnic diversity within a country. Notably, as ethnic diversity increases, joint ethnicity results in a more modest reduction in inflation. Additionally, the analysis reveals that in ethnically diverse settings, inflation tends to be lower when there is ethnic alignment between the central banker and the head of state, compared to scenarios without such alignment.

Suggested Citation

  • Strong, Christine & Yayi, Constant L., 2024. "Do central bankers' characteristics matter for Africa? Ethnic favoritism, fractionalization, and inflation," International Review of Financial Analysis, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:finana:v:94:y:2024:i:c:s1057521924001881
    DOI: 10.1016/j.irfa.2024.103256
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    More about this item

    Keywords

    Ethnic affiliation; Ethnic fractionalization; Favoritism; Central bank governors; Ally; President; Inflation;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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