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

  • Alagidede, Paul
  • Coleman, Simeon
  • Cuestas, Juan Carlos

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 raised.

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Paper provided by University of Stirling, Division of Economics in its series Stirling Economics Discussion Papers with number 2010-11.

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Date of creation: Oct 2010
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Handle: RePEc:stl:stledp:2010-11
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