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Modeling Inflation in the WAEMU's Zone

Oulatta, Moon (2016): Modeling Inflation in the WAEMU's Zone.

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This paper introduces a simple AS-AD model to examine the determinants of inflation for the members of the West African Economic and Monetary Union (WAEMU). On the supply side, we found France's inflation, rainfall, and real crude oil inflation to be the most important drivers of domestic inflation. On the demand side, we found the output gap to be a significant determinant of domestic inflation. Given the estimated size of the effect of the output gap on inflation, we can conclude that the short-run aggregate supply curve may be relatively flat; bolstering the Keynesian view that monetary policy could be extremely effective in stabilizing output in the short-run.

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