Bericht

Inflation thresholds and relative price variability in the ECOWAS region

While the relationship between inflation and relative price variability (RPV) has been widely investigated in developed and emerging market economies because of its direct relevance to monetary policy implementation, research has neglected this linkage in most developing countries especially in the ECOWAS region. This paper examines whether RPV responds differently to different inflation regimes across the ECOWAS region, determining the inflation threshold that would minimize the distortionary impact of expected inflation on RPV in the region. Using the Panel Smooth Transition Regression (PSTR) model over the period 2008:M1 to 2019:M12, the paper finds that ECOWAS countries would achieve lower RPV in the moderate/intermediate inflation regime where the undesirable effect of expected inflation on RPV fades out. This regime ranges from an inflation rate of 7.1 percent to 8.3 percent per annum. The paper further establishes different inflation thresholds for the WAEMU and WAMZ countries, which reflects the differences in inflation tolerance levels between the Zones. It shows that inflation targets below the thresholds of 5.5 percent and 8.3 percent per annum, are desirable in the WAEMU and WAMZ, respectively. Along these lines, this paper concludes that ECOWAS countries should adopt a two-tier inflation compliance regime, until a common monetary policy framework is adopted across the region. The determination of appropriate inflation targets in line with these thresholds in both Zones would pave the way for the adoption of an inflation targeting (IT) regime to anchor inflation expectations and enhance credibility to monetary policy across the wider ECOWAS region.

Sprache
Englisch

Erschienen in
Series: WAMI Occasional Paper Series ; No. 20

Klassifikation
Wirtschaft
Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
Price Level; Inflation; Deflation
Monetary Policy
Economywide Country Studies: Africa
Thema
Inflation threshold
relative prices
monetary policy
ECOWAS

Ereignis
Geistige Schöpfung
(wer)
Egbuna, Eunice N.
John-Sowe, Maimuna
Kargbo, Santigie M.
Bawa, Sani
Diallo, Ibrahima
Mendy, Isatou
Ereignis
Veröffentlichung
(wer)
West African Monetary Institute (WAMI)
(wo)
Accra
(wann)
2020

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Bericht

Beteiligte

  • Egbuna, Eunice N.
  • John-Sowe, Maimuna
  • Kargbo, Santigie M.
  • Bawa, Sani
  • Diallo, Ibrahima
  • Mendy, Isatou
  • West African Monetary Institute (WAMI)

Entstanden

  • 2020

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