Assessing the Effect of Exchange Rate Channel on Household Consumption in the West African Monetary Zone (WAMZ)

The effect of monetary transmission through the exchange rate channel on household consumption in the West African Monetary Zone (WAMZ) had been sparsely explored despite its role in stimulating aggregate demand in many developed countries. Based on this discovery from the literature reviewed, the study estimated the impact of exchange rate channel on household consumption in the WAMZ from 1986 to 2024. The unit root results supported the application of the panel autoregressive distributed lags model for regression analysis. The results revealed that in the short-run, all exchange rate variables have no significant impact on household consumption in the zone. In the long-run, except for inflation rate which significantly affected the household consumption expenditure in the Zone nominal exchange rate and trade balance have no significant effect. Therefore, the study concluded that the exchange rate channel through inflation rate has significant effect on household consumption expenditure in the WAMZ. Based on the findings, some policy implications were highlighted for monetary policy guide in the Zone. The study expanded the scope of literature on how consumption is influenced by exchange rate channel in developing countries particularly in the WAMZ for policy direction in the zone