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

  • Paul Alagidede
  • Simeon Coleman
  • Juan Carlos Cuestas

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 how 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 possible outstanding policy questions are also raised.

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Paper provided by Nottingham Trent University, Nottingham Business School, Economics Division in its series Working Papers with number 2010/8.

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Date of creation: Nov 2010
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Handle: RePEc:nbs:wpaper:2010/8
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