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Monetary Union in West Africa

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  • Paul R. Masson
  • Xavier Debrun
  • Catherine A. Pattillo

Abstract

We develop a multicountry model in which governments aim at excessive spending in order to serve the narrow interests of the group in power. This puts pressure on the monetary authorities to extract seigniorage, and thus affects the incentives countries would have to participate in a monetary union. This feature, ignored by the monetary union literature for Europe, is potentially important in Africa. We calibrate the model to data for West Africa and use it to assess proposed ECOWAS monetary unions. We conclude that monetary union with Nigeria would not be in the interests of other ECOWAS countries, unless it were accompanied by effective discipline over Nigeria''s fiscal policies.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/226.

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Length: 35
Date of creation: 01 Dec 2002
Date of revision:
Handle: RePEc:imf:imfwpa:02/226

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Keywords: West Africa; monetary union; inflation; monetary unions; monetary policy; terms of trade; central bank; monetary policies; monetary fund; monetary unification; trade shocks; terms of trade shocks; monetary autonomy; asymmetric shocks; monetary integration; neighboring countries; political economy; monetary zone; monetary expansions; balance of payments; bargaining power; independent monetary policies; monetary financing; national monetary policies; monetary expansion; european monetary union; bilateral trade; open economy; autonomous monetary policies; trade restrictions; intermediate monetary target; trade data; monetary institutions; trading arrangements; trade changes; autonomous monetary policy; international monetary arrangements; regional integration; loose monetary policies; inflation stabilization; regional trade; monetary authorities; international monetary policy; trade taxes; economic community; trade figures; monetary arrangements; world prices; monetary target; preferential trading; distortionary taxes; seigniorage revenues; geographic proximity; internal trade; monetary discipline; price stability; oil exporter; monetary policy framework; discretionary monetary policy; negative spillovers; trade patterns; oil importers; economic integration; export earnings;

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References

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Citations

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Cited by:
  1. Asongu Simplice, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real, Monetary and Fiscal Policy Convergence Analysis," Working Papers 12/006, African Governance and Development Institute..
  2. Katrin Elborgh-Woytek & Julian Berengaut, 2006. "Beauty Queens and Wallflowers," IMF Working Papers 06/226, International Monetary Fund.
  3. Etienne B. Yehoue, 2007. "The CFA Arrangements," IMF Working Papers 07/19, International Monetary Fund.
  4. Bamba, Lambert N'galadjo, 2004. "Analyse du Processus de Convergence Dans la Zone UEMOA," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  5. John Hawkins & Paul Masson, 2003. "Economic aspects of regional currency areas and the use of foreign currencies," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Regional currency areas and the use of foreign currencies, volume 17, pages 4-42 Bank for International Settlements.
  6. André, NYEMBWE & Konstantin, KHOLODILIN, 2005. "North-South Asymmetric Relationships : Does the EMU Business Affect Small African Economies ?," Discussion Papers (ECON - Département des Sciences Economiques), Université catholique de Louvain, Département des Sciences Economiques 2005032, Université catholique de Louvain, Département des Sciences Economiques.
  7. Richard Pomfret, 2003. "Formation and Dissolution of Monetary Unions: Evidence from Europe, and Lessons for Elsewhere," School of Economics Working Papers, University of Adelaide, School of Economics 2003-03, University of Adelaide, School of Economics.
  8. Balogun, Emmanuel Dele, 2009. "Alternative reconsideration of output growth differrential for the West African Monetary Zone," MPRA Paper 13416, University Library of Munich, Germany.
  9. Tsangarides, Charalambos G. & Qureshi, Mahvash Saeed, 2008. "Monetary Union Membership in West Africa: A Cluster Analysis," World Development, Elsevier, Elsevier, vol. 36(7), pages 1261-1279, July.
  10. Anthony J. Pellechio & Saqib Rizavi & Phebby Kufa, 2003. "Fiscal Sustainability and Policy Issues in the Eastern Caribbean Currency Union," IMF Working Papers 03/162, International Monetary Fund.
  11. Magazzino, Cosimo, 2012. "Revenue and expenditure nexus: A case study of ECOWAS," Economics Discussion Papers 2012-57, Kiel Institute for the World Economy.
  12. Carsten Hefeker, 2010. "Fiscal reform and monetary union in West Africa," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(1), pages 86-102.
  13. Simplice A, Asongu, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real and Monetary Policy Convergence Analysis," MPRA Paper 36056, University Library of Munich, Germany.
  14. Balogun, Emmanuel Dele, 2009. "Inflation differential in the West African Monetary Zone (WAMZ) area:Implications for unionization," MPRA Paper 13045, University Library of Munich, Germany.
  15. Andre, Nyembwe, 2003. "Monetary Policy, Credibility and Asymmetries : Small African Countries and the EMU Advent," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2003011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 06 Aug 2002.
  16. Kohnert, Dirk, 2007. "Togo: Failed election and misguided aid at the roots of economic misery," MPRA Paper 5207, University Library of Munich, Germany.
  17. Dorothy Engmann & Ousmane Dore & Benoít Anne, 2003. "Regional Impact of Cote D'Ivoire'S Sociopolitical Crisis," IMF Working Papers 03/85, International Monetary Fund.
  18. Kohnert, Dirk, 2005. "Die UEMOA und die CFA-Zone: Eine neue Kooperations-Kultur im frankophonen Afrika?
    [The WEAMU and the Franc CFA-Zone: A new culture of co-operation within Francophone Africa?]
    ," MPRA Paper 5436, University Library of Munich, Germany.
  19. Mahvash Saeed Qureshi & Charalambos G. Tsangarides, 2011. "Exchange Rate Regimes and Trade: Is Africa Different?," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Working Paper W, World Institute for Development Economic Research (UNU-WIDER).
  20. Zhao, Xiaodan & Kim, Yoonbai, 2009. "Is the CFA Franc Zone an Optimum Currency Area?," World Development, Elsevier, Elsevier, vol. 37(12), pages 1877-1886, December.

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