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Some Stylised Facts for the Economies of Anglophone West Africa and Guinea

Mogaji, Peter Kehinde (2018): Some Stylised Facts for the Economies of Anglophone West Africa and Guinea.

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This paper investigated some macroeconomic and financial stylised facts in the context of the developing economies of the Guinea and the five Anglophone West Africa countries, consisting of The Gambia, Ghana, Liberia, Nigeria and Sierra Leone. These six countries were collectively known as the West African Monetary Zone (WAMZ) up till 2014. The informal economies of the WAMZ countries, some macroeconomic stylised facts in respect of theoretical propositions like Phillips curve, Lucas output-inflation trade-off and International parity conditions (purchasing power parity (PPP) conditions, international Fisher effect - IFE, and uncovered interest parity - UIP) were evaluated. Also, the relationships between domestic cyclical output and some macroeconomic variables were considered in the assessments of business cycles from the view-point of the developing economies of the WAMZ and the developed economies of Germany, the United Kingdom and the United States. Some empirical regularities in exchange rates and the behaviours of foreign exchange markets were also evaluated. This paper covered the period of time spanning between 1991 and 2015 on the average. Findings and results revealed that variabilities of the cyclical components of seven selected macroeconomic variables examined were lower in the developed economies of Germany, the UK and the US than the developing economies of the WAMZ, thus supporting this stylised fact that the cycles of macroeconomic variables are more volatile in developing economies than in developed economies. There were evidences to infer that the validity of both absolute and relative PPP could not be established in the WAMZ, thus making PPP to be irrelevant in the exchange rate determination throughout the WAMZ. Results generated also suggested that IFE failed to hold for the WAMZ’s bilateral relationships. These results yielded supports for the conjecture that if PPP fails to hold, IFE will not hold. Evidences were also gathered towards drawing conclusions that UIP does not hold across the WAMZ. From the empirical evaluation performed, it is evident that the Phillip curve relationship does not hold in the WAMZ (apart from Ghana) over the period covered by this study. There were inferences that the Lucas output-inflation trade-off hold better in the formal economies of the WAMZ than the informal economies. Results generated through the evaluation of seven stylised facts of exchange rates and foreign exchange markets behaviour were mixed.

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