COVID-19 policy responses, inflation and spillover effects in the West African Economic and Monetary Union

This paper contributes to the emerging literature on the socioeconomic impacts of the coronavirus disease 2019 (COVID-19) pandemic by using a panel fixed effects model for estimating the impact of government policy responses to the pandemic and their spillover effects on the consumer price index for West African Economic and Monetary Union (WAEMU) countries over the period January 2019-July 2020. Across various robustness checks, the OLS and IV regressions provide three major pieces of evidence. First, the COVID-19 confirmed cases positively affect the consumer price index while the overall government policy responses index has a negative impact on the consumer price index. Second, we find that government accommodative policies to COVID-19 in other countries has a positive and statistically significant impact on the host country's consumer price index. Finally, the findings indicate that world food prices and oil prices positively affect the consumer price index. These results suggest that policymakers may consider intensifying the implementation of public policies in response to the pandemic for preserving the stability of prices when the sanitary situation of the COVID-19 deteriorates. While confirming that international prices are among the key drivers of inflation in WAEMU countries, our findings also reiterate the importance of regional cooperation and coordination for fighting the adverse socioeconomic impacts of the COVID-19 pandemic.