Inflation differential in the West African Monetary Zone (WAMZ) area:Implications for unionization

Emmanuel Balogun ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the determinants of inflation differentials in a panel of West African Monetary Zone (WAMZ) states vis-à-vis its set benchmark for macroeconomic convergence since 2000 to date. Using a stylized 5-country model of WAMZ area, the differences in national inflation is analyzed in light of country specific shocks or differences in the monetary transmission mechanisms. The main results show macroeconomic (price) stabilization around a desired target was not attained. Over the sample period, the un-weighted average regional inflation rates were most often above a single digit target and vary widely among the countries. The major monetary policy instruments determinants of inflationary divergence are the pursuit of distorted interest rates, exchange rates overvaluation and expansionary monetary policies, which penalized credit and accentuated output supply/demand gaps.

Keywords: Inflation differentials; price convergence; exchange rate; WAMZ members; panel data (search for similar items in EconPapers)
JEL-codes: E31 E52 (search for similar items in EconPapers)
Date: 2009-01-27
New Economics Papers: this item is included in nep-afr, nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:13045

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