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Inflationary shocks and common economic trends: Implications for West African monetary union membership

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  • Alagidede, Paul
  • Coleman, Simeon
  • Cuestas, Juan Carlos

Abstract

This paper examines the inflation dynamics and common trends in the real gross domestic product (GDP) in the candidate countries of the embryonic West African Monetary Zone (WAMZ). Using fractional integration and cointegration methods, we establish that significant heterogeneity in behavior exists among the countries. Shocks to inflation in Sierra Leone are not mean-reverting; results for the Gambia and Ghana suggest some inflation persistence, despite being mean-reverting. Further, the cointegration results indicate the presence of only one common trend. With much attention currently being placed on convergence criteria and preparedness of the aspiring member states, less attention has been given to the extent to which the dynamics of inflation and economic trends in the individual countries are (dis)similar. We discuss some policy implications and highlight political implications.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 34 (2012)
Issue (Month): 3 ()
Pages: 460-475

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Handle: RePEc:eee:jpolmo:v:34:y:2012:i:3:p:460-475

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Web page: http://www.elsevier.com/locate/inca/505735

Related research

Keywords: Inflationary shocks; Fractional integration; Stationarity; West Africa; Monetary unions;

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References

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Cited by:
  1. Asongu Simplice, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real and Monetary Policy Convergence Analysis," Working Papers 12/005, African Governance and Development Institute..
  2. Asongu, Simplice A, 2013. "New Empirics of monetary policy dynamics: evidence from the CFA franc zones," MPRA Paper 48495, University Library of Munich, Germany.
  3. Mustapha Ibn Boamah, 2013. "Exchange Rate Pass-through in Countries of the Proposed West African Monetary Zone (WAMZ)," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 74-82, February.
  4. Simplice A Asongu, 2013. "A Short-run Schumpeterian Trip to Embryonic African Monetary Zones," Economics Bulletin, AccessEcon, vol. 33(1), pages 859-873.
  5. Asongu, Simplice A, 2013. "REER Imbalances and Macroeconomic Adjustments in the Proposed West African Monetary Union," MPRA Paper 52211, University Library of Munich, Germany.
  6. Asongu Simplice, 2013. "How would monetary policy matter in the proposed African monetary unions? Evidence from output and prices," Working Papers 13/013, African Governance and Development Institute..
  7. Chuku, Chuku, 2012. "The proposed eco: should West Africa proceed with a common currency?," MPRA Paper 43739, University Library of Munich, Germany.
  8. Simplice A, Asongu, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real, Monetary and Fiscal Policy Convergence Analysis," MPRA Paper 41552, University Library of Munich, Germany.

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