Macroeconomic policy volatility and household consumption in Africa

Abstract

Consequences of debilitated macroeconomic policies are unhealthy for household consumption in most African countries. With inflation, the market value of African household’s disposable income is eroded, which leads to lower consumption bundle and subsequently, hardship. Despite the magnitude and significance of household final consumption expenditures in Africa, the cause–effect, evidence-based policy options of macroeconomic policy-induced household consumption remain underexplored and less understood. To establish a clear line of thought on the macroeconomic policy volatility-household consumption relations in Africa, we assigned numerical weights to the output elasticities of macroeconomic policy volatilities and household consumption relations in twenty (20) African countries using the panel structural vector auto-regressive (PSVAR) estimation technique. We took cognisance of idiosyncratic and standard structural shocks responses. We allowed thoroughly ranked cross-sectional variances of dynamic elasticities. Findings reveal that macroeconomic policy volatilities induce significant changes in household final consumption expenditure in Africa. Policy implications were discussed.