Financial systems and the effectiveness of monetary policy in African countries : a policy perspective

Abstract

With the basic objective of stabilizing the nation's currency, and hence price stability, the conduct and formulation of monetary policy typically rests with the central bank. The monetary function is supported by auxiliary functions such as promotion of the development of the money market, performance of bank regulation and supervision, and safeguard of the payments and clearing system. Indeed, the stability and efficiency of the financial sector, particularly the banking system, has now become a major concern of central banks both in the industrial and emerging economies that resort to indirect monetary policy. The typical monetary instruments of choice in industrial economies have been open market operations with central bank bills or treasury bills. These operations are greatly facilitated by highly developed primary and secondary capital markets in these countries.