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What is Fuzzy About Clustering in West Africa?

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  • Mahvash Saeed Qureshi
  • Charalambos G. Tsangarides

Abstract

Applying techniques of clustering analysis to a set of variables suggested by the convergence criteria and the theory of optimal currency areas, this paper looks for country homogeneities to assess membership in the existing and proposed monetary unions of the broader west African region. Our analysis reveals considerable dissimilarities in the economic characteristics of the countries in west and central Africa. In particular, the West African Monetary Zone (WAMZ) countries do not form a cluster with the West Africa Economic and Monetary Union (WAEMU) countries; and, within the WAMZ, there is a significant lack of homogeneity. Furthermore, when west and central African countries are considered together, we find significant heterogeneities within the CFA franc zone, and some interesting similarities between the Economic and Monetary Community of Central Africa (CEMAC) and WAMZ countries. Overall, our findings raise some questions about the geographical boundaries of several existing and proposed monetary unions.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/90.

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Length: 45
Date of creation: 01 Mar 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/90

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Keywords: West Africa; West African Economic and Monetary Union; Central African Economic and Monetary Community; Data analysis; monetary union; terms of trade; monetary integration; inflation; trade intensity; monetary unions; terms of trade shocks; trade shocks; monetary arrangements; monetary unification; regional trade; trade changes; monetary policy; monetary fund; monetary zone; asymmetric shocks; optimum currency areas; monetary community; correlation of business cycles; monetary arrangement; economic integration; central bank; regional integration; price stability; monetary area; accession countries; transactions costs; trade flows; optimal monetary policy; world markets; average trade; trade routes; low trade; output volatility; european monetary union; international monetary arrangements; monetary system; exchange rate policies; world economy; exchange rate fluctuations; annual exchange rate; monetary policy independence; oil importers; economic community; factor analysis; exchange rate regime; competitive advantage; factor endowments; export structure; external shocks; independent monetary policy; value of trade; monetary expansion; monetary independence; oil exporter; expansionary monetary policy; money supply; open economies; monetary policies;

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  10. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-25, July.
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  18. 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, 03.
  19. Khamfula, Yohane & Huizinga, Harry, 2004. "The Southern African Development Community: suitable for a monetary union?," Journal of Development Economics, Elsevier, vol. 73(2), pages 699-714, April.
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  21. Artis, M.J. & Zhang, W., 2002. "Membership of EMU: A Fuzzy Clustering Analysis of Alternative Criteria," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 17, pages 54-79.
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