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Persistence of inflationary shocks: Implications for West African Monetary Union Membership\ud

By P. Alagidede, S. Coleman and J.C. Cuestas


Plans are far advanced to form a second monetary union, the West African Monetary Zone\ud (WAMZ), in Africa. While much attention is being placed on convergence criteria and\ud preparedness of the five aspiring member states, less attention is being placed on the extent\ud to which the dynamics of inflation in individual countries are (dis)similar. This paper aims to\ud stimulate debate on the long term sustainability of the union by examining the dynamics of\ud inflation within these countries. Using Fractional Integration (FI) methods, we establish that\ud some significant differences exist among the countries. Shocks to inflation in Sierra Leone\ud are non mean reverting; results for The Gambia, Ghana and Guinea-Bissau suggest some\ud inflation persistence, despite being mean reverting. Some policy implications are discussed\ud and some warnings are raised

Publisher: Department of Economics, University of Sheffield
Year: 2010
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