Price Setting Behaviour in Economic Community of West African States: Some Stylized Facts

Working Paper
Published on 7 September 2021


This study analysed the stylized facts that characterised price-setting behaviour in the Economic Community of West African States (ECOWAS). The price database consisted of unique highly disaggregated micro-level retail level price data underlying the computation of the National Consumer Price Index (CPI) in Nigeria, Benin and Togo and was collected monthly for five years from January 2011 to December 2015. Descriptive statistics were used to align theories of price rigidities with the price dataset. Findings from this study showed that price-setting behaviour differs across the three countries. Specifically, the frequency of price changes is not the same across the three countries with high price volatility in Nigeria as Togo and Benin probably due to their different monetary regimes. There are more price increases than price decreases across the three countries signifying price rigidity downward. Also, the average price spell varies across the three countries with Nigeria having a shorter spell than Togo and Benin. The frequency of price changes also showed a seasonal pattern across the three countries but at different times of the year. Inflation also co-varies with the size of price changes for the three countries indicating that the state-dependent pricing model fits the data for the region than the time-dependent pricing model. These results have two policy implications. The need for a stable macroeconomic environment in the region and reduction in price volatility in Nigeria relative to Togo and Benin.


Taiwo Owoeye

Ekiti State University

Olufemi Ajiboye

Ekiti State University