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

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

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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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
DOI: 10.1016/j.jpolmod.2011.10.001
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505735

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