A Causal Relationship between Corporate Investment and Inflation: empirical investigation from WAMZ economy

Abstract

       The paper examines causal relationship between corporate investment and inflation for four countries in West African Monetary Zone, using the Vector Error Correction model (VECM). The study discovered that there is co-integration between investment and inflation in the selected countries in WAMZ. This implies that a long run relationship between inflation and investment in the selected WAMZ nations. The results show that investment Granger causes inflation in Gambia, Ghana and Nigeria while inflation Granger causes investment in Sierra Leone but bi-directional relationship inflation and investment was not found in WAMZ.

  However, the results show that there are needs to ensure reforms and policies that should be adopted and must become the utmost priority in the WAMZ economies for the monetary policy to be effective in influencing economic activities which in turn enhances investment in the zone.