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

  • Paul Alagidede
  • Simeon Coleman
  • Juan Carlos Cuestas

    ()

    (Department of Economics, The University of Sheffield)

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 the extent to which 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 some warnings are raised.

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File URL: http://www.shef.ac.uk/economics/research/serps/articles/2010_020.html
File Function: First version, 2010
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Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2010020.

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Length: 22 pages
Date of creation: Nov 2010
Date of revision: Nov 2010
Handle: RePEc:shf:wpaper:2010020
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