Essays on Monetary Policy, Inclusive Growth, and Sovereign Defaults

Abstract: This thesis provides a timely analysis of important topical issues facing the monetary policy front and the global economy, building on the research on sovereign default risk and more recent developments in the literature on the implications of monetary policy for inclusive growth and income inequality. The thesis starts with an evaluation of the monetary policy transmission and income inequality in Sub-Saharan Africa (SSA) countries. I find a procyclical response of income inequality to unanticipated monetary easing in the last two decades. Countercyclical monetary measures may have been efficient, but they have been dis-equalising as well. The second part evaluates how financial development affects the distributive channel of monetary policy. This chapter provides a unique view from Sub- Saharan Africa on the role of the financial structure in the transmission mechanism, from monetary policy to income inequality. The findings show that the financial system plays an important role in the redistributive effects of monetary policy. The evidence shows that the strength of the monetary transmission is more dependent on financial development than the nature of the policy regime. The third chapter evaluates the role of monetary policy towards inclusive growth. The evidence from a large sample of countries shows that monetary policy that aims at low inflation and stable economic growth is most likely to improve permanently, growth inclusiveness and the conditions of the poor. Thus, the twin objectives of macroeconomic stability and inclusive growth offer no trade-offs. Finally, I empirically analyse the impacts of debt reliefs during the period 1990–2019 on the sovereign debt crises of developing and emerging countries. The analysis shows that the debt reliefs provided thus far failed to ease the debt overhang problems of developing and emerging countries. The current debt relief schemes may underscore the prospects of self-enforcing and self-fulfilling sovereign debt crises rather than eliminating the dilemma completely. Regarding the forms of debt relief, the analysis shows that debt forgiveness offers favourable prospects in terms of debt sustainability and economic outcomes than debt rescheduling.