n African Finance Journal - Economic integration and exchange rate dynamics in the West African monetary zone




We revisit the validity of long-run purchasing power parity in the West African Monetary Zone for quarterly data spanning from 1960 up to 2014. By allowing for unknown endogenous structural breaks in the data, the evidence indicates the existence of cointegration between nominal exchange rates and prices in all the countries. The results support that the PPP holds and can serve as a benchmark for exchange rate modeling in the sub-region. However, the diverse speeds of adjustment towards the equilibrium relationship suggests to exchange rate policymakers to take into account individual economic, social and political circumstances of the countries. We discuss the implications of these findings to guide policy choices in the monetary zone.


Article metrics loading...

This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error