External Factors and Domestic Policies: Determinants of Inflation in ECOWAS

Abstract

Food price inflation remains a critical challenge in ECOWAS, where high import dependence and weak institutional frameworks heighten vulnerability to external shocks. This study examines the determinants of inflation in ECOWAS, with a focus on the asymmetric effects of global food price shocks from 2010 to 2022. We discover that the pass-through of food prices more than doubles in high-inflation environments and heightens during economic recessions. The WAEMU's fixed exchange rate and fiscal rules sever the standard inflationary link between public debt and inflation observed in more flexible regimes. Strong institutional quality provides a universal stabilising effect across all countries. Our findings are consistent with theories of state-dependent amplification, where pre-existing macroeconomic vulnerabilities critically determine an economy's resilience to external shocks.