IDEAS home Printed from https://ideas.repec.org/a/bla/sajeco/v89y2021i4p608-634.html
   My bibliography  Save this article

A single currency for the Economic Community of West Africa? An economic assessment

Author

Listed:
  • João Loureiro
  • Evaldo Baptista

Abstract

This paper assesses the economic support for the creation of an Economic Community of West African States (ECOWAS) monetary union encompassing all its 15 members, an objective that was set more than 30 years ago. In line with previous empirical research, our conclusion is that the adoption of a common currency by the whole region is not recommended. This work takes a step forward and assesses alternative ways to reduce the current number of currencies in circulation in the Community. Based on our results, we suggest (i) the merging of the currencies of Guinea, Liberia and Sierra Leone into a single currency and (ii) the Gambia to join the West African Economic and Monetary Union (WAEMU).

Suggested Citation

  • João Loureiro & Evaldo Baptista, 2021. "A single currency for the Economic Community of West Africa? An economic assessment," South African Journal of Economics, Economic Society of South Africa, vol. 89(4), pages 608-634, December.
    • Handle: RePEc:bla:sajeco:v:89:y:2021:i:4:p:608-634
    DOI: 10.1111/saje.12299
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/saje.12299
    Download Restriction: no
    File URL: https://libkey.io/10.1111/saje.12299?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Xavier Debrun & Paul R. Masson, 2013. "Modelling Monetary Union in Southern Africa: Welfare Evaluation for the CMA and SADC," South African Journal of Economics, Economic Society of South Africa, vol. 81(2), pages 275-291, June.
    2. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-1025, July.
    3. S. Jules-Armand Tapsoba, 2009. "Trade Intensity and Business Cycle Synchronicity in Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 18(2), pages 287-318, March.
    4. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    5. Jakob De Haan & Robert Inklaar & Richard Jong‐A‐Pin, 2008. "Will Business Cycles In The Euro Area Converge? A Critical Survey Of Empirical Research," Journal of Economic Surveys, Wiley Blackwell, vol. 22(2), pages 234-273, April.
    6. Tsangarides, Charalambos G. & Qureshi, Mahvash Saeed, 2008. "Monetary Union Membership in West Africa: A Cluster Analysis," World Development, Elsevier, vol. 36(7), pages 1261-1279, July.
    7. Anja Shortland & David Stasavage, 2004. "What Determines Monetary Policy in the Franc Zone? Estimating a Reaction Function for the BCEAO," Journal of African Economies, Centre for the Study of African Economies, vol. 13(4), pages 518-535, December.
    8. Agnès Bénassy‐Quéré & Maylis Coupet, 2005. "On the Adequacy of Monetary Arrangements in Sub‐Saharan Africa," The World Economy, Wiley Blackwell, vol. 28(3), pages 349-373, March.
    9. Xavier Debrun & Paul Masson & Catherine Pattillo, 2005. "Monetary union in West Africa: who might gain, who might lose, and why?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(2), pages 454-481, May.
    10. Chee-Heong Quah, 2016. "A Diagnostic on the West African Monetary Union," South African Journal of Economics, Economic Society of South Africa, vol. 84(1), pages 129-148, March.
    11. Mr. Romain M Veyrune, 2007. "Fixed Exchange Rates and the Autonomy of Monetary Policy: The Franc Zone Case," IMF Working Papers 2007/034, International Monetary Fund.
    12. Houssa, Romain, 2008. "Monetary union in West Africa and asymmetric shocks: A dynamic structural factor model approach," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 319-347, February.
    13. Daniel Simons & Rosmy Jean Louis, 2018. "Monetary union in West Africa and business cycles synchronicity: New evidence," The World Economy, Wiley Blackwell, vol. 41(10), pages 2828-2848, October.
    14. Martin Grandes, 2003. "Macroeconomic Convergence in Southern Africa: The Rand Zone Experience," OECD Development Centre Working Papers 231, OECD Publishing.
    15. Paul R. Masson, 2019. "Currency Unions in Africa: Is the Trade Effect Substantial Enough to Justify Their Formation?," World Scientific Book Chapters, in: Macroeconomic Modelling and Monetary and Exchange Rate Regimes, chapter 7, pages 243-262, World Scientific Publishing Co. Pte. Ltd..
    16. Golub, Stephen S. & Mbaye, Ahmadou Aly, 2009. "National Trade Policies and Smuggling in Africa: The Case of The Gambia and Senegal," World Development, Elsevier, vol. 37(3), pages 595-606, March.
    17. Michael Bleaney & Manuela Francisco, 2005. "Exchange rate regimes and inflation: only hard pegs make a difference," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1453-1471, November.
    18. Ms. Catherine A Pattillo & Mr. Paul R Masson, 2001. "Monetary Union in West Africa (ECOWAS)," IMF Occasional Papers 2001/003, International Monetary Fund.
    19. Gilles Dufrénot & Kimiko Sugimoto, 2013. "West African Single Currency and Competitiveness," Review of Development Economics, Wiley Blackwell, vol. 17(4), pages 763-777, November.
    20. George S. Tavlas, 2009. "The Benefits And Costs Of Monetary Union In Southern Africa: A Critical Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 23(1), pages 1-43, February.
    21. Simplice Asongu, 2014. "REER Imbalances and Macroeconomic Adjustments in the Proposed West African Monetary Union," South African Journal of Economics, Economic Society of South Africa, vol. 82(2), pages 276-289, June.
    22. Bleaney, Michael & Fielding, David, 2002. "Exchange rate regimes, inflation and output volatility in developing countries," Journal of Development Economics, Elsevier, vol. 68(1), pages 233-245, June.
    23. Alagidede, Paul & Coleman, Simeon & Cuestas, Juan Carlos, 2012. "Inflationary shocks and common economic trends: Implications for West African monetary union membership," Journal of Policy Modeling, Elsevier, vol. 34(3), pages 460-475.
    24. Coulibaly, Issiaka & Gnimassoun, Blaise, 2013. "Optimality of a monetary union: New evidence from exchange rate misalignments in West Africa," Economic Modelling, Elsevier, vol. 32(C), pages 463-482.
    25. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
    26. Adu, Raymond & Litsios, Ioannis & Baimbridge, Mark, 2019. "Real exchange rate and asymmetric shocks in the West African Monetary Zone (WAMZ)," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 59(C), pages 232-249.
    27. Francesco Paolo Mongelli, 2005. "What is European Economic and Monetary Union Telling us About the Properties of Optimum Currency Areas?," Journal of Common Market Studies, Wiley Blackwell, vol. 43(3), pages 607-635, September.
    28. Longo, Robert & Sekkat, Khalid, 2004. "Economic Obstacles to Expanding Intra-African Trade," World Development, Elsevier, vol. 32(8), pages 1309-1321, August.
    29. Mr. Tamon Asonuma & Mr. Xavier Debrun & Mr. Paul R Masson, 2012. "Welfare Effects of Monetary Integration: The Common Monetary Area and Beyond," IMF Working Papers 2012/136, International Monetary Fund.
    30. Ms. Iyabo Masha & Mr. Leighton S Harris & Mr. Jian-Ye Wang & Ms. Kazuko Shirono, 2007. "The Common Monetary Area in Southern Africa: Shocks, Adjustment, and Policy Challenges," IMF Working Papers 2007/158, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mattera, Raffaele & Franses, Philip Hans, 2023. "Are African business cycles synchronized? Evidence from spatio-temporal modeling," Economic Modelling, Elsevier, vol. 128(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Asongu, Simplice A. & Folarin, Oludele E. & Biekpe, Nicholas, 2019. "The long run stability of money demand in the proposed West African monetary union," Research in International Business and Finance, Elsevier, vol. 48(C), pages 483-495.
    2. Samba Diop & Simplice A. Asongu, 2020. "An Index of African Monetary Integration (IAMI)," Working Papers 20/003, European Xtramile Centre of African Studies (EXCAS).
    3. Simplice Asongu & Jacinta C. Nwachukwu & Vanessa S. Tchamyou, 2017. "A summary of a survey on proposed African monetary unions," Working Papers of the African Governance and Development Institute. 17/008, African Governance and Development Institute..
    4. Fontana, Giuseppe & Kamara, Mohamed Sheriff Hamid, 2023. "Towards monetary union in the Economic Community of West African States (ECOWAS): Better policy harmonisation and greater intra-trade are needed," Journal of Policy Modeling, Elsevier, vol. 45(1), pages 58-73.
    5. Couharde, Cécile & Grekou, Carl & Mignon, Valérie, 2022. "On the economic desirability of the West African monetary union: Would one currency fit all?," Economic Modelling, Elsevier, vol. 113(C).
    6. Simplice Asongu & Jacinta Nwachukwu & Vanessa Tchamyou, 2017. "A Literature Survey On Proposed African Monetary Unions," Journal of Economic Surveys, Wiley Blackwell, vol. 31(3), pages 878-902, July.
    7. Adu, Raymond & Litsios, Ioannis & Baimbridge, Mark, 2019. "Real exchange rate and asymmetric shocks in the West African Monetary Zone (WAMZ)," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 59(C), pages 232-249.
    8. Mattera, Raffaele & Franses, Philip Hans, 2023. "Are African business cycles synchronized? Evidence from spatio-temporal modeling," Economic Modelling, Elsevier, vol. 128(C).
    9. George S. Tavlas, 2009. "The Benefits And Costs Of Monetary Union In Southern Africa: A Critical Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 23(1), pages 1-43, February.
    10. Coulibaly, Issiaka & Gnimassoun, Blaise, 2013. "Optimality of a monetary union: New evidence from exchange rate misalignments in West Africa," Economic Modelling, Elsevier, vol. 32(C), pages 463-482.
    11. Adu, Raymond & Litsios, Ioannis & Baimbridge, Mark, 2022. "ECOWAS single currency: Prospective effects on trade," Journal of International Money and Finance, Elsevier, vol. 126(C).
    12. Ekong, Christopher N. & Onye, Kenneth U., 2012. "On The Feasibility of a Common Currency in West Africa: Evidence from a Multivariate Structural VAR," MPRA Paper 88357, University Library of Munich, Germany.
    13. Xavier Debrun & Paul R. Masson & Catherine Pattillo, 2019. "Should African Monetary Unions Be Expanded? An Empirical Investigation of the Scope for Monetary Integration in Sub-Saharan Africa," World Scientific Book Chapters, in: Macroeconomic Modelling and Monetary and Exchange Rate Regimes, chapter 6, pages 195-242, World Scientific Publishing Co. Pte. Ltd..
    14. Daniel Simons & Rosmy Jean Louis, 2018. "Monetary union in West Africa and business cycles synchronicity: New evidence," The World Economy, Wiley Blackwell, vol. 41(10), pages 2828-2848, October.
    15. Houssa, Romain, 2008. "Monetary union in West Africa and asymmetric shocks: A dynamic structural factor model approach," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 319-347, February.
    16. Chuku, Chuku, 2012. "The proposed eco: should West Africa proceed with a common currency?," MPRA Paper 43739, University Library of Munich, Germany.
    17. Mulatu F. Zerihun & Marthinus C. Breitenbach & Francis Kemegue, 2014. "A Greek Wedding In SADC? Testing For Structural Symmetry Towards SADC Monetary Integration," The African Finance Journal, Africagrowth Institute, vol. 16(2), pages 16-33.
    18. Wörgötter, Andreas & Brixiova, Zuzana, 2020. "Monetary Unions of Small Currencies and a Dominating Member: What Policies Work Best for Benefiting from the CMA?," IZA Policy Papers 163, Institute of Labor Economics (IZA).
    19. Zhao, Xiaodan & Kim, Yoonbai, 2009. "Is the CFA Franc Zone an Optimum Currency Area?," World Development, Elsevier, vol. 37(12), pages 1877-1886, December.
    20. Daniel Agyapong & Anokye M. Adam, 2012. "Exchange Rate Behaviour: Implication for West African Monetary Zone," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 2(4), pages 215-228, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:sajeco:v:89:y:2021:i:4:p:608-634. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/essaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.