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Intra- and inter-continental transmission of inflation in Africa

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  • Jin-Gil Jeong
  • Philip Fanara
  • Charlie Mahone

Abstract

In this paper, the transmission pattern of inflation in Africa is investigated in several contexts. Specifically, the results of the decomposition of variance are analysed, which are obtained by estimating an error correction model comprising 11 countries: seven major African countries and four industrialized countries, i.e., the USA, UK, France, and Japan. The major empirical findings are as follows. First, a surprisingly large fraction of domestic inflation in Africa is attributable to inflation shocks originating in foreign countries. Second, the USA is found to be the leading producer of inter-continental inflation in Africa. Third, although the Ivory Coast does seem to be the marginal leader, geographical proximity does not seem to play a significant role in intra-continental inflation transmission. Fourth, Friedman (Essays in Positive Economics, University of Chicago, 1953)'s argument for the flexible exchange regime is found to be marginally valid for Sub-Saharan African countries: African countries adopting the independently floating exchange rate system tend to be less influenced by foreign inflation innovations.

Suggested Citation

  • Jin-Gil Jeong & Philip Fanara & Charlie Mahone, 2002. "Intra- and inter-continental transmission of inflation in Africa," Applied Financial Economics, Taylor & Francis Journals, vol. 12(10), pages 731-741.
    • Handle: RePEc:taf:apfiec:v:12:y:2002:i:10:p:731-741
    DOI: 10.1080/09603100110037496
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    References listed on IDEAS

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    2. Estefania Mourelle & Juan Carlos Cuestas & Luis Alberiko Gil‐alana, 2011. "Is There An Asymmetric Behaviour In African Inflation? A Non‐Linear Approach," South African Journal of Economics, Economic Society of South Africa, vol. 79(1), pages 68-90, March.
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    4. Adugna Lemi & Sisay Asefa, 2009. "Differential Impacts of Economic Volatility and Governance on Manufacturing and Non-Manufacturing Foreign Direct Investments: The Case of US Multinationals in Africa," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 35(3), pages 367-395.

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