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Persistence of Inflationary shocks: Implications for West African Monetary Union Membership

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  • Paul Alagidede
  • Simeon Coleman
  • Juan Carlos Cuestas

    ()
    (Department of Economics, The University of Sheffield)

Abstract

Plans are far advanced to form a second monetary union, the West African Monetary Zone (WAMZ), in Africa. While much attention is being placed on convergence criteria and preparedness of the five aspiring member states, less attention is being placed on the extent to which the dynamics of inflation in individual countries are (dis)similar. This paper aims to stimulate debate on the long term sustainability of the union by examining the dynamics of inflation within these countries. Using Fractional Integration (FI) methods, we establish that some significant differences exist among the countries. Shocks to inflation in Sierra Leone are non mean reverting; results for The Gambia, Ghana and Guinea-Bissau suggest some inflation persistence, despite being mean reverting. Some policy implications are discussed and some warnings are raised.

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File URL: http://www.shef.ac.uk/economics/research/serps/articles/2010_020.html
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Bibliographic Info

Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2010020.

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Length: 22 pages
Date of creation: Nov 2010
Date of revision: Nov 2010
Handle: RePEc:shf:wpaper:2010020

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Keywords: Inflationary shocks; fractional integration; stationarity; West Africa; Monetary unions;

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Cited by:
  1. Daniel Agyapong & Anokye M. Adam, 2012. "Exchange Rate Behaviour: Implication for West African Monetary Zone," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 2(4), pages 215-228, October.

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