MONETARY POLICY, EXCHANGE RATE INERTIA, AND INFLATION EXPECTATIONS IN THE WEST AFRICAN MONETARY ZONE: AN EMPIRICAL INVESTIGATION

Authors

  • Abraham Unekwu Department of Banking and Finance, University of Nigeria
  • Ebere Ume Kalu Department of Banking and Finance University of Nigeria
  • Wilfred Isioma Ukpere Department of Industrial Psychology and People Management, School of Management, College of Business Economics, University of Johannesburg
  • Oluchukwu F. Anowor Department of Industrial Psychology and People Management, College of Business and Economics, University of Johannesburg

DOI:

https://doi.org/10.18623/rvd.v22.n6.4011

Keywords:

Exchange Rate Inertia, Fiscal Dominance, Inflation Expectation, Monetary Policy Inertia, WAMZ

Abstract

This paper revisits the interaction between monetary policy, exchange rate inertia and inflation expectations with consideration for the West African Monetary Zone. It is an inquiry into the extent to which monetary policy lags and exchange rate depreciation influence inflation targeting in the six WAMZ countries. The data for the study were drawn from the International Monetary Fund (IMF), World Bank and National Central Banks, covering the period 1995-2024. The study follows the autoregressive distributed lag model (ARDL) as the major estimation technique. Empirical feedback reveals that monetary policy inertia has an indirect but substantial effect on the inflation expectation in the WAMZ, while exchange rate inertia exhibits a direct but insignificant relationship with the inflation expectation. The study therefore concluded that with the high pass-through and the exchange rate as one of the main indicators, the central banks are expected to improve their strategies of managing the exchange rate on a formal basis. Also, to resolve the issue of fiscal dominance, which damages the credibility of the monetary policy, governments need to strive to limit central bank financing and enhance public debt management.

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Published

2025-12-15

How to Cite

Unekwu, A., Kalu, E. U., Ukpere, W. I., & Anowor, O. F. (2025). MONETARY POLICY, EXCHANGE RATE INERTIA, AND INFLATION EXPECTATIONS IN THE WEST AFRICAN MONETARY ZONE: AN EMPIRICAL INVESTIGATION. Veredas Do Direito, 22(6), e224011. https://doi.org/10.18623/rvd.v22.n6.4011

Issue

Vol. 22 No. 6 (2025): Veredas do Direito, v. 22, n. 6 2025

Section

Articles

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