International audienc

We use laboratory experiments with human subjects to test the relevance of different inflation-targeting regimes. In particular and within the standard New Keynesian model, we evaluate to what extent communication of the inflation target is relevant to the success of inflation targeting. We find that if the central bank cares only about inflation stabilization, announcing the inflation target does not make a difference in terms of macroeconomic performance compared with a standard active monetary policy. However, if the central bank also cares about the stabilization of economic activity, communicating the target helps to reduce the volatility of inflation, interest rate, and output gap, although their average levels are not affected. This finding is consistent with the theoretical literature and provides a rationale for the adoption of a flexible inflation-targeting regime.

This article empirically investigated the causal relationship between labour productivity and economic growth in the West African Economic and Monetary Union (WAEMU) region. Recent panel cointegration and Granger causality techniques were adopted to analyse this relationship for the period 1994 to 2018. For robustness checks, three main Granger causality tests were applied in the context of panel VAR, namely: (a) the standard stacked Granger causality, (b) the Dumitrescu and Hurlin (2012) Granger causality, and (c) the Toda and Yamamoto (1995) augmented VAR approach to Granger causality. Contrary to the previous literature and general beliefs, the study found no evidence (neither in the short-run nor in the long-run) of a causal relationship between labour productivity and economic growth in the WAEMU region. The finding suggested that, as long as one considers labour input a determinant of economic growth, the latter is rather intensive labour-based than efficient labour-based in the case of WAEMU. This puzzling result can be explained by the low structural level of labour productivity stemming from the very high proportion of informal employment in these countries. The finding provided important policy implications for the WAEMU countries notably in terms of improving labour productivity in the informal economy, which appears to be the fundamental key to economic development in these countries.

Using panel cointegration and Granger causality techniques for the period 1994 to 2018, this article empirically explores the relationship between foreign direct investment (FDI) and economic growth in the West African Economic and Monetary Union (WAEMU). Contrary to the literature’s widely accepted opinion, we find no evidence of a causal relationship between FDI inflows and economic growth in the WAEMU region. This surprising result can be explained by the weakness of absorptive capacity factors as pointed out by the literature. However, we find contrary to the literature that the importance of absorptive capacity is a necessary but not sufficient condition to ensure the growth impact of FDI in these countries. The Null effect of FDI inflows on growth is also explained by the structural FDI sector-oriented puzzle observed in these countries. Sectors attracting the most FDI inflows are the ones that contribute the least to economic growth. Conversely, sectors contributing the most to economic growth are those which attract the least foreign capital. This finding provides crucial policy implications for the WAEMU region in terms of rethinking their FDI attractiveness policies in favor of more efficient, and inclusive economic growth.