Forging Monetary Hawks: Early-Life Inflation Experiences and Government Debt in Africa

Abstract

This study uses a novel dataset to examine the impact of early-life inflation experiences on government debt across 30 African nations from 1980 to 2022. We propose that central bankers who encountered inflation crises during their formative years are more likely to develop preferences for hawkish monetary policies. However, for these preferences to influence fiscal outcomes, central bankers must operate within an environment of institutional independence. Indeed, our analysis reveals that past exposures to inflation crises, on their own, have no statistically significant impact on government debt. However, when central bank independence is accounted for, a significant negative relationship emerges, indicating that institutional autonomy enables central bankers to translate their early-life experiences into policies that curb debt accumulation. This relationship holds even after controlling for central bankers' expertise, highlighting the critical interplay between personal history and institutional design in shaping government debt dynamics.