Inflation pressures and a search for an anchor: A case study of the Wamz region

This study seeks to identify which of three major international currencies could serve as an optimal anchor for selected countries in the ECOWAS (Economic Community of West African States). These selected countries include The Gambia, Ghana, Guinea, Nigeria, and Sierra Leone. The price, output, and trade data sourced from various international data portals like the World Development Indicators of the World Bank and the International Financial Statistics of the International Monetary Fund are used to compute comovement relationships between prices and outputs. And then, by employing autoregressive (AR) models, the research analyses and establishes a more statistically rigorous relationship amongst these macroeconomic indicators—gross domestic product (GDP), consumer price index (CPI), and bilateral trade. The study highlights how and which among the United States dollar (USD), the euro, and the Chinese yuan could potentially benefit these countries by influencing economic performance and overall stability, particularly if countries in the region were to dollarize. The issue of persistent price instability—more specifically, inflationary pressures—that has plagued Anglophone West African economies for years has been receiving increasing attention in recent times, renewed by global economic shocks and inflation woes associated with the COVID-19 pandemic, geopolitical tension, and other disruptive international events. These new challenges have accentuated the need for more reliable monetary frameworks across the Economic Community of West African States region. The intent of the findings is to offer policymakers insights as they consider future monetary strategies. The study aims to influence decision-making related to exchange rates, inflation control, and broader regional economic integration efforts.