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Budget deficits, money supply and price level in West Africa

Author

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  • Yaya Keho

    (Ecole Nationale Supérieure de Statistique et d’Economie Appliquée (ENSEA) Abidjan.)

Abstract

Using West African Economic and Monetary Union (WAEMU) dataset for 1970 to 2013, and Pesaran et al. (2001) methodology, this study examines the effect of budget deficit and money supply on inflation. Evidence shows that there is a long run relation among the variables in all countries except Mali. Price and budget deficit are positively related in Niger and Togo, and negatively related in Benin and Senegal. Further, money supply and price are positively related in Burkina Faso, Cote d’Ivoire and Senegal. Results from the Granger causality tests indicate that deficits cause money growth in Cote d’Ivoire, Mali and Togo, and cause the price level in Senegal. There is no causality from money supply to inflation in the short-run. Results suggest that idea that budget deficits are not inflationary in WAEMU countries. Hence, the policy of reducing inflation should focus on other macroeconomic and structural determinants of inflation across WAEMU.

Suggested Citation

  • Yaya Keho, 2016. "Budget deficits, money supply and price level in West Africa," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 4(5), pages 1-8, October.
  • Handle: RePEc:lrc:lareco:v:4:y:2016:i:5:p:1-8
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    References listed on IDEAS

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    More about this item

    Keywords

    ARDL bounds test; Budget deficit; Money supply; WAEMU.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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