Nonlinearity and nonlinear convergence of inflation rates in the West African Monetary Zone: a way to Monetary Integration

Muhammad Ilyas (), Liying Song (), Mukhtar Danladi Galadima (), Muhammad Noshab Hussain () and Abdul Sattar ()
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Muhammad Ilyas: School of Economics and Finance Xian Jiaotong University
Liying Song: School of Economics and Finance Xian Jiaotong University
Mukhtar Danladi Galadima: Federal University Dutse
Muhammad Noshab Hussain: School of Economics and Finance Xian Jiaotong University
Abdul Sattar: Xi’an Jiaotong University China/Government College University

Portuguese Economic Journal, 2025, vol. 24, issue 1, No 6, 83-100

Abstract: Abstract The inflation rate is one key indicator for a group of countries to achieve the harmonization required to establish stable and sustainable monetary integration. However, for the West African Monetary Zone (WAMZ), despite its ambition to embark on monetary integration for about two decades now, achieving this requirement is still a question of investigation. This study examines the nonlinearity and nonlinear convergence of inflation rates among the WAMZ countries as a way to monetary integration. We use inflation rates from 2000 to 2022 and employ a variety of linear and nonlinear tests (such as the Brock–Dechert–Scheinkman–LeBaron nonlinearity test, the Harvey nonlinearity test, the Dickey–Fuller Generalized Least Squares linear unit root test, the Ng–Perron linear unit root test, the Cuestas–Ordonez nonlinear unit root test, the Park–Shintani nonlinear unit root test, and the Hu–Chen nonlinear unit root test). The findings revealed that the data generating process of inflation in the WAMZ countries is nonlinear and that there is inflation convergence in those countries. This means that the countries share similar long-run inflation and, therefore, meet one key criterion for a group of countries to share a common currency.

Keywords: Inflation; Inflation convergence; Nonlinear analysis; West African Monetary Zone (search for similar items in EconPapers)
JEL-codes: E31 F33 F41 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10258-024-00257-6

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