New evidence on the output-inflation trade-off from developing economies: the case of the CFA Franc zone

This aim of this paper is to give a contribution to the debate on whether output-inflation trade-offs are negatively influenced by the mean of inflation (as postulated by new-Keynesians) or by the variability of inflation (as postulated by neo-classical economists). To remove any concerns about the arbitrariness of the choice of the sample, the analysis will focus on a group of countries belonging to the same currency union, the Franc Zone. The results do not provide conclusive evidence on either theory as it was found that there existed a negative relation between the output-inflation trade-offs and the mean of inflation on the one hand, and the variability of inflation, on the other.