Inflation Persistence, Price Rigidity, and Monetary Policy Transmission in Selected Sub-Saharan African Countries

Abstract

This study investigates the relationship among inflation persistence, price rigidity, and monetary policy transmission in 15 selected Sub-Saharan African (SSA) economies over the period 2008Q1–2024Q4 within a New Keynesian framework. Using the Panel Autoregressive Distributed Lag (PARDL) technique, the study examines both the short-run and long-run dynamics among inflation, price rigidity, monetary policy transmission, output gap, and fiscal balance. The findings reveal the existence of a stable long-run relationship among the variables. The results further show that price rigidity has a positive and significant effect on inflation, indicating that sticky price behaviour contributes to persistent inflationary pressures across SSA economies. Monetary policy transmission is found to exert a negative and significant influence on inflation, suggesting that stronger and more effective transmission mechanisms improve inflation control. In addition, the output gap positively affects inflation, while fiscal balance has a negative relationship with inflation. The study concludes that inflation persistence in SSA is largely driven by structural rigidities, weak monetary transmission channels, cyclical demand pressures, and fiscal imbalances. It therefore recommends strengthening monetary policy credibility, improving transmission mechanisms, reducing structural sources of price rigidity, and promoting fiscal discipline to achieve sustainable price stability in the region.