A new perspective on the asymmetric Phillips curve: Fresh evidence from ECOWAS member countries

Abstract

A growing body of scholarly research has explored the non-linearity of the Phillips curve, but empirical evidence from an African perspective, particularly within the ECOWAS sub-regional context, remains underexplored. This study aims to address this gap by offering a fresh perspective on the asymmetric Phillips curve for West African countries through a comparative country-specific analysis and a panel framework utilizing the nonlinear autoregressive distributed lag (NARDL) model for the period 1986–2020. The empirical outcomes demonstrate that the asymmetric response of inflation to both positive and negative unemployment differs across the countries of Benin, Burkina Faso, Ghana, Guinea, Cote d’Ivoire, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo. Specifically, the study finds that inflation declines when unemployment rises and surges when unemployment declines in both short- and long-term dynamics. These findings highlight that low unemployment during economic expansion leads to wage-price spirals, while high unemployment results in low inflationary pressure during economic downturns in the analyzed countries. The empirical outcomes are robust and consistent for both country-specific and panel analyses, but the extent of the inflation response to unemployment is more pronounced in the WAMZ subregion. This study provides valuable insights for policymakers regarding the formulation of sound regional monetary policy.