Inflation Uncertainty and Relative Price Variability in WAEMU Countries
IMF Working Papers, March 1, 2011
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- Inflation Uncertainty and Relative Price Variability in WAEMU Countries
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Bibliographic details
- Authors: Kerstin Gerling, Carlos Fernandez Valdovinos
- Published: March 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455221035.001
Summary
- Using a consistent dataset and methodology for all eight member countries of the West African Economic and Monetary Union (WAEMU) from 1994 to 2009, the paper provides evidence on two major channels for real effects of inflation: inflation uncertainty and relative price variability.
- In line with theory and most evidence for advanced and emerging market economies, higher inflation increases inflation uncertainty and relative price variability in all WAEMU countries.
- The pattern, magnitude and timing of these two channels vary considerably by country.
- The findings raise several policy issues for future research.
Key findings
- Dataset and coverage:
- Eight WAEMU member countries.
- Period covered: 1994 to 2009.
- Main empirical results:
- Higher inflation → increased inflation uncertainty (all WAEMU countries).
- Higher inflation → increased relative price variability (all WAEMU countries).
- Cross-country heterogeneity: pattern, magnitude, and timing differ considerably across countries.
Policy implications and research agenda
- The heterogeneity in pattern, magnitude, and timing implies country-specific considerations for policy design.
- The results point to several policy issues that warrant further research (the paper identifies these issues but detailed recommendations are presented in the full text).
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