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Inflation differential in the West African Monetary Zone (WAMZ) area:Implications for unionization

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  • Balogun, Emmanuel Dele

Abstract

This paper examines the determinants of inflation differentials in a panel of West African Monetary Zone (WAMZ) states vis-à-vis its set benchmark for macroeconomic convergence since 2000 to date. Using a stylized 5-country model of WAMZ area, the differences in national inflation is analyzed in light of country specific shocks or differences in the monetary transmission mechanisms. The main results show macroeconomic (price) stabilization around a desired target was not attained. Over the sample period, the un-weighted average regional inflation rates were most often above a single digit target and vary widely among the countries. The major monetary policy instruments determinants of inflationary divergence are the pursuit of distorted interest rates, exchange rates overvaluation and expansionary monetary policies, which penalized credit and accentuated output supply/demand gaps.

Suggested Citation

  • Balogun, Emmanuel Dele, 2009. "Inflation differential in the West African Monetary Zone (WAMZ) area:Implications for unionization," MPRA Paper 13045, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:13045
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    References listed on IDEAS

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    More about this item

    Keywords

    Inflation differentials; price convergence; exchange rate; WAMZ members; panel data;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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