African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4156

Full Length Research Paper

Monetary policy in Cape Verde and macroeconomic changes: Empirical evidences

Jailson da Conceicao Teixeira de Oliveira
  • Jailson da Conceicao Teixeira de Oliveira
  • PPGE/UFPB, Brazil.
  • Google Scholar
Bruno Ferreira Frascaroli
  • Bruno Ferreira Frascaroli
  • Federal University of Paraiba ? PPGE/UFPB, Brazil.
  • Google Scholar
Osvaldo Candido da Silva Filho
  • Osvaldo Candido da Silva Filho
  • Catholic University of Brasília (UCB), Brazil.
  • Google Scholar

  •  Received: 02 May 2014
  •  Accepted: 04 February 2015
  •  Published: 14 February 2015


The main objective of this study was to analyze Cape Verdean monetary policy, the rules chosen by the decision makers, its changes and its transmission to the economy. Primarily, we analyzed the dynamics of the most important Cape Verdean macroeconomic time series. By using the Vector Autoregression (VAR) and the Markov Switching Vector Autoregression (MS-VAR) models, we also analyzed and compared how those dynamics were connected to the monetary policy regime adopted during the period of 1991 to 2011. We tried two models, in the second of which was included the effective exchange rate index in order to capture transmissions of the exchange rate channel.. Through the MS-VAR, we also estimated two regimes which were statistically identified. The second regime seems to be more persistent and characterized the entire period from 1993 to 2006, which matches with important changes in Cape Verde's economy. We compare the impulse-response functions estimated by using the VAR model and the impulse-response regime-dependent functions estimated by MS-VAR models. The latter indicated that only in the second regime does a positive shock in the residuals of interest rate have the expected effects, decreasing the output level and the price index.


Key words: Monetary policy transmission channels, Cape Verde, MS-VAR.


JEL code: C15, C32, E31, E52