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Nonlinearity and nonlinear convergence of inflation rates in the West African Monetary Zone: a way to Monetary Integration

Author

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  • Muhammad Ilyas

    (School of Economics and Finance Xian Jiaotong University)

  • Liying Song

    (School of Economics and Finance Xian Jiaotong University)

  • Mukhtar Danladi Galadima

    (Federal University Dutse)

  • Muhammad Noshab Hussain

    (School of Economics and Finance Xian Jiaotong University)

  • Abdul Sattar

    (Xi’an Jiaotong University China/Government College University)

Abstract

The inflation rate is one key indicator for a group of countries to achieve the harmonization required to establish stable and sustainable monetary integration. However, for the West African Monetary Zone (WAMZ), despite its ambition to embark on monetary integration for about two decades now, achieving this requirement is still a question of investigation. This study examines the nonlinearity and nonlinear convergence of inflation rates among the WAMZ countries as a way to monetary integration. We use inflation rates from 2000 to 2022 and employ a variety of linear and nonlinear tests (such as the Brock–Dechert–Scheinkman–LeBaron nonlinearity test, the Harvey nonlinearity test, the Dickey–Fuller Generalized Least Squares linear unit root test, the Ng–Perron linear unit root test, the Cuestas–Ordonez nonlinear unit root test, the Park–Shintani nonlinear unit root test, and the Hu–Chen nonlinear unit root test). The findings revealed that the data generating process of inflation in the WAMZ countries is nonlinear and that there is inflation convergence in those countries. This means that the countries share similar long-run inflation and, therefore, meet one key criterion for a group of countries to share a common currency.

Suggested Citation

  • Muhammad Ilyas & Liying Song & Mukhtar Danladi Galadima & Muhammad Noshab Hussain & Abdul Sattar, 2025. "Nonlinearity and nonlinear convergence of inflation rates in the West African Monetary Zone: a way to Monetary Integration," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 24(1), pages 83-100, January.
    • Handle: RePEc:spr:portec:v:24:y:2025:i:1:d:10.1007_s10258-024-00257-6
    DOI: 10.1007/s10258-024-00257-6
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    References listed on IDEAS

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    More about this item

    Keywords

    Inflation; Inflation convergence; Nonlinear analysis; West African Monetary Zone;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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