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Modeling Inflation in the WAEMU's Zone

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  • Oulatta, Moon

Abstract

This paper introduces a simple AS-AD model to examine the determinants of inflation for the members of the West African Economic and Monetary Union (WAEMU). On the supply side, we found France's inflation, rainfall, and real crude oil inflation to be the most important drivers of domestic inflation. On the demand side, we found the output gap to be a significant determinant of domestic inflation. Given the estimated size of the effect of the output gap on inflation, we can conclude that the short-run aggregate supply curve may be relatively flat; bolstering the Keynesian view that monetary policy could be extremely effective in stabilizing output in the short-run.

Suggested Citation

  • Oulatta, Moon, 2016. "Modeling Inflation in the WAEMU's Zone," MPRA Paper 82983, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:82983
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    File URL: https://mpra.ub.uni-muenchen.de/92894/9/MPRA_paper_82983.pdf
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    References listed on IDEAS

    as
    1. Bhandari, Pranjul & Frankel, Jeffrey, 2017. "Nominal GDP targeting for developing countries," Research in Economics, Elsevier, vol. 71(3), pages 491-506.
    2. Mr. Tidiane Kinda, 2011. "Modeling Inflation in Chad," IMF Working Papers 2011/057, International Monetary Fund.
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    More about this item

    Keywords

    Inflation; Two Stage Least Squares; Monetary policy; BCEAO;
    All these keywords.

    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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