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Abstract
The study examined the effect of monetary policy on manufacturing value added (performance) of the CFA franc zone of SSA based on panel data covering 7 countries in the region from 1995 to 2021. The study employed the panel ARDL model, which is estimated with three dynamic panel estimators, namely Mean Group (MG), Pooled Mean Group (PMG), and Dynamic Fixed Effect to capture the long and short-run response of the manufacturing sector to monetary policy. Lending interest rate, exchange rate, and domestic credits to the private sector were monetary policy variables while manufacturing value added was used to measure manufacturing performance. Findings from the study show that in the short-run, all monetary variables comprising the lending interest rate, credit to the private sector, and exchange rate have no real impact on manufacturing sector performance. However, in the long run, lending interest rate and credit to the private sector have significant negative and positive effects respectively on manufacturing performance while the exchange rate had no real impact. The study concludes that monetary policy has a significant impact on manufacturing sector performance in the zone through lending interest rates and domestic credits. Based on the findings, the study recommends an expansionary monetary policy that involves a lowering of lending interest rates to provide more incentives for manufacturers to invest and increase output. Manufacturer-specific credits should be increased and closely monitored to boost production. The region should diversify the export basket from primary products and adopt market-determined exchange rate.