How Relevant is Inflation Targeting in ECOWAS Common Currency Programme?

How Relevant is Inflation Targeting in ECOWAS Common Currency Programme? | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article How Relevant is Inflation Targeting in ECOWAS Common Currency Programme? Ebere Ume Kalu, Nelson Nkwor, Austin Ujunwa, Mamdouh Abdulaziz Saleh Al-Faryan, and 2 more This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-5811266/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract We examine the relevance of inflation targeting (IT) in the Economic Community of West African States’ (ECOWAS) common currency using the stability of money demand function to determine appropriate monetary policy framework. We employed annual data from 2003 to 2022 and autoregressive distributed lag (ARDL) bound test approach and find the presence of a long-run relationship between money demand function and its determinants. The CUSUM and CUSUM of square tests reveal the stability of money demand for the selected countries. Monetary targeting is more appropriate for ECOWAS since member countries have stable money demand. Based on the findings, we recommend the adoption of integrated inflation targeting framework, which involves setting flexible reserve money targets and interest rate corridors, sustaining a flexible exchange rate regime, and strengthening prudential supervision and regulation to promote financial system resilience against exchange rate shocks. This approach would promote policy transparency and accountability from inception. JEL Classification: FO2, E41, E52, E5 Currency Union Inflation Targeting Money Demand Stability ARDL Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-5811266","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":406819152,"identity":"29dd78ef-5c8c-4783-aa8b-3c52dbb4e4cf","order_by":0,"name":"Ebere Ume Kalu","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAA7UlEQVRIiWNgGAWjYDACCTCZwMDHwHwAInKAWC1sDGwJJGvhMSBOC79087EPHxjS5Nkkcr5JF+5gkOO7kcD28AseLZJzjiXPnMGQY9gmkbtNeuYZBmPJGwnsxjJ4tBjcyDFm5mGoYARr4W1jSNwAtEVaAo8W+xv5n5n/MFTYt0nkPANpqSeoxUAih5mZgSEnEaiFDaQlwQCoRfIDHi0Sd44ZM/YYpCW38TwztuZtkzCceeZhmzQeHQz8s5sfM/yoSLbtZ09+eJu3zUae73jyMckf+PRAnIewFYgZG4ABQipgJGzLKBgFo2AUjCAAAK7LRDJcyfCvAAAAAElFTkSuQmCC","orcid":"","institution":"University of Nigeria","correspondingAuthor":true,"prefix":"","firstName":"Ebere","middleName":"Ume","lastName":"Kalu","suffix":""},{"id":406819153,"identity":"f78b9e69-3c13-45e8-8756-09c7aedf7a4f","order_by":1,"name":"Nelson Nkwor","email":"","orcid":"","institution":"Alex Ekwueme Federal University Ndufu-Alike","correspondingAuthor":false,"prefix":"","firstName":"Nelson","middleName":"","lastName":"Nkwor","suffix":""},{"id":406819154,"identity":"4a2b5d67-da53-471a-ac70-cead53cc2987","order_by":2,"name":"Austin Ujunwa","email":"","orcid":"","institution":"Global Banking School, Leeds Campus, UK","correspondingAuthor":false,"prefix":"","firstName":"Austin","middleName":"","lastName":"Ujunwa","suffix":""},{"id":406819155,"identity":"7cd928ac-621b-4277-b8e7-f072a4919d31","order_by":3,"name":"Mamdouh Abdulaziz Saleh Al-Faryan","email":"","orcid":"","institution":"Board Member and Head of the Scientific Committee at The Saudi Economic Association. 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We employed annual data from 2003 to 2022 and autoregressive distributed lag (ARDL) bound test approach and find the presence of a long-run relationship between money demand function and its determinants. The CUSUM and CUSUM of square tests reveal the stability of money demand for the selected countries. Monetary targeting is more appropriate for ECOWAS since member countries have stable money demand. Based on the findings, we recommend the adoption of integrated inflation targeting framework, which involves setting flexible reserve money targets and interest rate corridors, sustaining a flexible exchange rate regime, and strengthening prudential supervision and regulation to promote financial system resilience against exchange rate shocks. 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