Inflation persistence in the Franc zone: Evidence from disaggregated prices

Abstract

In sub-Saharan Africa, where inflation persistence is likely to have deleterious welfare consequences, little attempt has been made to study this phenomenon. Using data over 1989:11–2002:09, this paper investigates persistence in ( food and non-food) inflation for 12 Communauté Financière Africaine (CFA) member states using fractional integration (FI) methods. The results show that both inflation series are characterized by mean-reversion and finite variance. However, it also exposes some asymmetry in inflation persistence across member states in both sectors. In Côte d’Ivoire, Chad and Niger the phenomenon is found to exist in both sectors. With uniform monetary policy across member states, implications for Monetary Policy, Nominal Convergence and Optimal Currency Area are then discussed.