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The market-based monetary policy framework has been favoured by Economic Community of
West African States (ECOWAS) economies. Hence, this study aims to investigate the effect of monetary policy
channels on the sectoral value added and sustainable economic growth in ECOWAS. Data from the World
Bank and International Monetary Fund over 2013–2019 were sourced for thirteen member countries. ECOWAS
is found to have very high inflation level, interest and exchange rates.
The study adopted the Driscoll–Kraay fixed-effects ordinary least
squares regression (OLS) estimator.
The findings revealed that while the effect of monetary policy channels on the agricultural sector
value added is largely heterogenous and significantly in-elastic, the one on the industrial and services sectors
are overwhelmingly homogeneous and negative, but insignificant for the services sector. Moreover, the effect of
monetary policy channels on sustainable economic growth is also homogeneously asymmetric, with imminent
stagflation, while the interactive effects of monetary policy channels are heterogeneous on sustainable
economic growth and economic sectors. Therefore, an inflation targeting monetary policy stance is generally
recommended with prioritised exchange rate stabilisation amid sufficient fiscal space.
This is amongst the first studies to investigate monetary policy channels, sectoral
outputs and sustainable growth in the ECOWAS region with a rigorous analysis and found implications for
policy.
