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Re-Examining the Mean Reversion of Inflation Rate in ECOWAS

Bedi Guy Herve Drama
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Bedi Guy Herve Drama: Department of Economics, University Peleforo Gon of Korhogo, France

Asian Economic and Financial Review, 2018, vol. 8, issue 5, 653-668

Abstract: This paper investigates whether inflation series is mean-reverting in Economic Community of West African States (ECOWAS). First generation panel unit root tests (LLC, MW, Breitung, Hadri, ADF, PP and IPS) are conducted in the paper. These tests indicate that inflation do not contains a unit root. It is however well-known that these first generation unit root tests have a limit: they are based on the cross-sectional independency hypothesis. Hence, in this work, Panel Analysis of Nonstationarity in Idiosyncratic and Common Component (PANIC) is performed in order to investigate if inflation is mean reverting process even we relax the previous assumption. The main finding of this paper is that rate of inflation in ECOWAS is a stationary process.

Keywords: Inflation rate; ECOWAS; Mean-reversion; PANIC; The Pooled MSB; Panel unit roots (search for similar items in EconPapers)
JEL-codes: C12 C15 C22 C23 E31 (search for similar items in EconPapers)
Date: 2018
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