Abstract

This article attempts to determine an inflation target for WAMU. For this, the optimal inflation threshold, defined as the level of inflation that maximizes economic growth, is determined endogenously using the PSTR method developed by González et al. (2005). Using data covering the period 1980- 2016, we find that the relationship between inflation and economic growth is likely to be non-linear in WAMU. Formally, we note that the optimal inflation threshold is around 3.9%. This non-linear relationship between inflation and economic growth in the WAEMU countries is robust to sensitivity analyzes, resulting in thresholds of 2.7% to 4.1%. These results imply an inflation target between 2% and 4% around 3%. This objective, fundamentally not calling into question the target of 2% defined by the Monetary Policy Committee of the BCEAO, suggests a slight easing of monetary policy to achieve higher economic growth in the WAMU.