Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/315106 
Year of Publication: 
2025
Series/Report no.: 
IES Working Paper No. 3/2025
Publisher: 
Charles University in Prague, Institute of Economic Studies (IES), 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.
Subjects: 
Inflation differentials
exchange rate
fiscal deficit
GDP per capita growth
price divergence
economic instability
panel data
JEL: 
E31
F41
Document Type: 
Working Paper

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