Climate anomalies and price dynamics: insights from Sub-Saharan African currency unions

Xavier Emmanuel Wend Kuni Compaore (), Hamza Bennani () and Camille Aït-Youcef ()
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Xavier Emmanuel Wend Kuni Compaore: LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Nantes Univ - IAE Nantes - Nantes Université - Institut d'Administration des Entreprises - Nantes - Nantes Université - pôle Sociétés - Nantes Univ - Nantes Université
Hamza Bennani: LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Nantes Univ - IAE Nantes - Nantes Université - Institut d'Administration des Entreprises - Nantes - Nantes Université - pôle Sociétés - Nantes Univ - Nantes Université
Camille Aït-Youcef: LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Nantes Univ - IAE Nantes - Nantes Université - Institut d'Administration des Entreprises - Nantes - Nantes Université - pôle Sociétés - Nantes Univ - Nantes Université

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Abstract: This paper examines the dynamic impact of climate anomalies on consumer prices within two Sub-Saharan African (SSA) currency unions: the West African Monetary Union (WAMU) and the Central African Monetary Union (CAMU). Using Jordá's (2005) local projections method on a monthly panel dataset covering 2002M1–2019M12, we estimate the impulse responses of headline and food CPI inflation to temperature, precipitation, and aridity anomalies. At the currency-union level, a sustained 1 ◦ C increase in temperature anomalies raises headline infla- tion by up to 0.4 percentage point in WAMU and up to 1 percentage point in CAMU within the first year following the shock. By contrast, a 10 mm decrease in precipitation anomalies produces smaller and less systematic effects, peaking at around 0.1 percentage point in WAMU and 0.04 percentage point in CAMU. When using a composite aridity anomaly index cap- turing compounded hydro-climatic stress, we find persistent inflationary responses of about 0.4 percentage point in both unions. Disaggregated results show that food inflation responds more strongly than headline inflation, with peak increases of 1 percentage point in WAMU and 1.4 percentage points in CAMU following temperature shocks. Country-level estimations reveal substantial heterogeneity: semi-arid and agriculture-dependent economies experience larger and more persistent effects, while higher income levels, higher energy consumption, and stronger political stability dampen transmission. These findings, robust across alternative specifications and estimation methods, underscore the importance of systematically integrating climate risks into macroeconomic and monetary policy frameworks, particularly in climate- vulnerable fixed exchange-rate regimes.

Keywords: Sub-Saharan Africa; Local projections; Fixed exchange rate regimes; Agricultural dependence; Climate anomalies; Aridity anomalies; Inflation dynamics (search for similar items in EconPapers)
Date: 2026-06-25
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Published in Climatic Change, 2026, 179 (7), pp.151. ⟨10.1007/s10584-026-04218-0⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05698544

DOI: 10.1007/s10584-026-04218-0

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