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Inflation Differentials in the African Economic Community

Author

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  • Tersoo David Iorngurum

    (Charles University, Prague)

Abstract

This paper examines the determinants of inflation differentials across member states of the African Economic Community (AEC). The results suggest that exchange rate depreciation, GDP per capita growth, price divergence, fiscal deficit, and periods of economic instability all contribute to higher differentials. On the other hand, differentials are not significantly influenced by a country´s output gap and the persistence of its differentials. Given that price stability and low differentials are essential for monetary integration and improved welfare in the AEC, this study concludes that policies aimed at exchange rate stabilization, fiscal discipline, and fiscal coordination may be beneficial for member states.

Suggested Citation

  • Tersoo David Iorngurum, 2025. "Inflation Differentials in the African Economic Community," Working Papers IES 2025/03, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Mar 2025.
    • Handle: RePEc:fau:wpaper:wp2025_03
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    File URL: https://ies.fsv.cuni.cz/en/inflation-differentials-african-economic-community
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    More about this item

    Keywords

    Inflation differentials; exchange rate; fiscal deficit; GDP per capita growth; price divergence; economic instability; panel data;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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