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Re-Examining the Mean Reversion of Inflation Rate in ECOWAS

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  • DRAMA Bedi Guy Hervé

Abstract

This paper investigates whether inflation series is mean-reverting in Economic Community of West African States (ECOWAS). First generation panel unit root tests (LLC, MW, Breitung, Hadri, ADF, PP and IPS) are conducted in the paper. These tests indicate that inflation do not contains a unit root. It is however well-known that these first generation unit root tests have a limit: they are based on the cross-sectional independency hypothesis. Hence, in this work, Panel Analysis of Nonstationarity in Idiosyncratic and Common Component (PANIC) is performed in order to investigate if inflation is mean reverting process even we relax the previous assumption. The main finding of this paper is that rate of inflation in ECOWAS is a stationary process.

Suggested Citation

  • DRAMA Bedi Guy Hervé, 2018. "Re-Examining the Mean Reversion of Inflation Rate in ECOWAS," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(5), pages 653-668.
    • Handle: RePEc:asi:aeafrj:v:8:y:2018:i:5:p:653-668:id:1701
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