Thesis (MBA)--Stellenbosch University, 2007. / The interaction between central bank role and fiscal policy is so crucial to the
macroeconomic outcome of any economy. The role of fiscal policy is so strong in
detennining central bank policies. This is why central bank behaviour is usually analyzed
using a model, which incorporates an effect of fiscal pressure on monetary policy
fonnulation. With primary deficit pressure by the fiscal authorities, the response to such
government budget deficit plays an interactive role in affecting the tradewoff weights
applied to the competing goals of monetary policy. The intenningling of these two
policies creates a counter-cyclical reaction, which finds roots in the Central Bank of
Liberia Act of 1999 that establishes the principal-agent relationship between the Central
Bank of Liberia and the government.
Liberia's emergence from intennittent periods of civil tunnoil and unrest has created the
dire need for an upswing of its ravaged economy. This is especially explained by the high
unemployment and illiteracy rate looming in the country. Additionally, there have been
the successive failures of national government to put in place the requisite mechanisms
for management and equitable distribution of the country's resources to its citizens.
This study gives a diagnosis and the symptoms of Liberia's economic state. According to
the World Bank, Liberia is listed in the category of Highly Indebted Poor Countries
(HIPC). Poverty traces a vicious cycle from low income to low saving and investment to
low output so back to low income.
This study identifies the role the Central Bank of Liberia can play in the economic
recovery process of Liberia. This study project will further examine and draw lessons
from other developing economies, which are applicable to Liberia. In this direction,
countries that are perfonning well in achieving moderate to high economic growth will
be looked at in an attempt to draw meaningful lessons for Liberia's drive for the
attairunent of economic growth.
It is expected that there is no quick fix to economic recovery especially so for a third
world country that has been plagued by numerous calamities resulting in the looting and
pillaging of the country's resources. The recovery of Liberia from its economic woes will
involve other stakeholders besides the Central Bank. This may include the sovereign
government through its line ministries and sector-specific agencies as well as the
multilateral and bilateral partners of Liberia making up the donor community.
This study also reveals the shape of Liberia's economy with regards to the structure of
the economy. The controlling of public debt and an encouragement of private debt for
investment purposes is a right step in the right direction along the path of economic
recovery.
This study will also examine monetary policy instruments and their limitations as far as
the implementation is concerned. Monetary policy can be implemented by changing the
size of the monetary base. This directly changes the total amount of money circulating in
the economy. A central bank can use open market operations to change the monetary
base.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/21976 |
| Date | 12 1900 |
| Creators | Walker, Richard H. |
| Contributors | Mlambo, Chipo, Stellenbosch University. Faculty of Economic and Management Sciences. Graduate School of Business. |
| Publisher | Stellenbosch : Stellenbosch University |
| Source Sets | South African National ETD Portal |
| Language | en_ZA |
| Detected Language | English |
| Type | Thesis |
| Format | 75 p. : ill |
| Rights | Stellenbosch University |
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