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Inflation Convergence in the East African Community: A Fractional Integration and Cointegration Study

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  • Hector Carcel

    (ICS, Navarra Center for International Development and Faculty of Economics, University of Navarra, Pamplona, Spain)

  • Luis A. Gil-Alana

    (ICS, Navarra Center for International Development and Faculty of Economics, University of Navarra, Pamplona, Spain)

  • Godfrey Madigu

    (ICS, Navarra Center for International Development and Faculty of Economics, University of Navarra, Pamplona, Spain)

Abstract

In this study we have examined the inflation convergence hypothesis in the five countries that belong to the East African Community and which recently signed a protocol outlining their plans for launching a monetary union within ten years. We check for common patterns in the persistence in the inflation levels. As it is argued in the literature, countries hoping to form a monetary union should present similar inflation patterns. Our study shows that the inflation rates in these countries present orders of integration equal to higher than one in all cases, confirming that shocks will most certainly not recover in the long run. Moreover, fractional cointegration relationships are also found across all the countries with the exception of Tanzania, suggesting that this country displays a different pattern compared to the remaining four, presenting also some evidence of a break in the data.

Suggested Citation

  • Hector Carcel & Luis A. Gil-Alana & Godfrey Madigu, 2015. "Inflation Convergence in the East African Community: A Fractional Integration and Cointegration Study," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 15(4), pages 507-524, December.
  • Handle: RePEc:wsi:gejxxx:v:15:y:2015:i:04:n:gej-2015-0002
    DOI: 10.1515/GEJ-2015-0002
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    References listed on IDEAS

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    Cited by:

    1. Abban, Stanley, 2020. "Currency Union as a Panacea for ills in Africa: A New Institutional Framework and Theoretical Consideration," MPRA Paper 105459, University Library of Munich, Germany.
    2. Dridi, Jemma & Nguyen, Anh D. M., 2017. "Inflation Convergence In East African Countries," MPRA Paper 80393, University Library of Munich, Germany.

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