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Revisiting the West African Commonwealth Countries’ Exchange Rate Pass-Through to Inflation

Ibrahim Abdulhamid Danlami ()

Academic Journal of Economic Studies, 2020, vol. 6, issue 1, 70-77

Abstract: The study analyzed the exchange rate pass-through (ERPT) to inflation in West African Commonwealth Countries (WACCs). The study used a Dynamic Panel Data Model–Pool Mean Group (PMG) that was chosen by the Hausman test over the Mean Group (MG) and Dynamic Fixed Effect Model (DFE). Data for a period 1980–2016 was used, and the results indicate the absence of ERPT to inflation in WACCs in the short run and the economy corrects itself towards the long run in about two short-run periods. Meanwhile, evidence of complete ERPT to inflation was established in WACCs in the long run. Therefore, the study advised the policymakers of WACCs to strengthen their export promotion policies and import substitution strategies for the purpose of stabilizing their exchange rate by which, without it, inflationary pressure will perpetuate itself in their economy. Stability in the exchange rate will help towards attaining, to some extent, sustainable price stability in WACCs economies.

Keywords: Commonwealth; dynamic panel; exchange rate; inflation; PMG (search for similar items in EconPapers)
JEL-codes: E30 E31 F31 (search for similar items in EconPapers)
Date: 2020
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Handle: RePEc:khe:scajes:v:6:y:2020:i:1:p:70-77