In Search of a New-Keynesian Hybrid Phillips Curve for the West African Economic and Monetary Union

International Journal of Economics and Management Studies

© 2021 by SSRG - IJEMS Journal

Volume 8 Issue 11

Year of Publication : 2021

Authors : Koffi Sodokin

10.14445/23939125/IJEMS-V8I11P103

How to Cite?

Koffi Sodokin, "In Search of a New-Keynesian Hybrid Phillips Curve for the West African Economic and Monetary Union," SSRG International Journal of Economics and Management Studies, vol. 8,  no. 11, pp. 22-30, 2021. Crossref, https://doi.org/10.14445/23939125/IJEMS-V8I11P103

Abstract:

The economic literature has been very sparse on the nature of the Phillips curve in the West African Economic and Monetary Union countries. This paper attempts to fill this gap and explores the dynamics of inflation in the sub-region over the period 1980-2018 using the hybrid form of the New Keynesian Phillips curve. I make some slight modifications to the specification proposed by Gali and Gertler (1999), due to the specificity of the small economies of the West African Economic and Monetary Union, to show, using the generalized method of moments, that the dynamics of inflation is not homogeneous in the zone. In practice, inflation is prospective for some groups of countries and retrospective for others. Thus, the output gap does not always perfectly reflect inflationary pressures in the zone. In fact, and contrary to theoretical predictions, the relationship between the output gap and the lagged inflation rate of k periods is not always positive.

Keywords:

Monetary Union, Hybrid Phillips Curve.

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