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REAL Exchange Rate Misalignment and Economic Performance of WEST AFRICAN MONETARY ZONE:Implications for macroeconomic unionisation

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  • Raji, Rahman Olanrewaju
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    Abstract

    The study assessed the real exchange rate misalignment and economic performance of WAMZ economies to determine its implications on economic unionization. The study uses Generalised Method of Moment of Dynamic Panel Estimation Method and supported with Cross Country Correlation Approach which comprises Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone covering the period from 2000 commencement of the zone to 2010 from international financial statistics of international monetary fund. The study discovered that the zone experiences asymmetrical correlations between real exchange rate misalignment and economic performance while the inclusion of equilibrium real exchange rate revealed a symmetrical relationship with economic performance. Further revelation in the study happened to be the cross country correlations which unveiled that four countries emerged to have a moderate degree of symmetrical relationship using some macroeconomic variables such real exchange rate, misaligned real exchange rate, openness, inflation and output. The study concluded by admonishing the zone to commence with four promising economies such as a Gambia, Ghana, Nigeria and Sierra Leone.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37385.

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    Date of creation: 15 Mar 2012
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    Handle: RePEc:pra:mprapa:37385

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    Keywords: WAMZ; misalignment real exchange rate; currency union;

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    1. Jayaraman, Tiru K. & Ward , Bert D., 2006. "A Single Currency for Pacific Island Countries: An SVAR Analysis," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 59(1), pages 83-111.
    2. Houssa, Romain, 2008. "Monetary union in West Africa and asymmetric shocks: A dynamic structural factor model approach," Journal of Development Economics, Elsevier, Elsevier, vol. 85(1-2), pages 319-347, February.
    3. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 29-51, July.
    4. Balogun, Emmanuel Dele, 2007. "Monetary policy and economic performance of West African Monetary Zone Countries," MPRA Paper 4308, University Library of Munich, Germany.
    5. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
    6. Ofair Razin & Susan M. Collins, 1997. "Real Exchange Rate Misalignments and Growth," NBER Working Papers 6174, National Bureau of Economic Research, Inc.
    7. Foresti, Pasquale, 2007. "Is Latin America an Optimal Currency Area? Evidence from a Structural Vector Auto-regression analysis," MPRA Paper 2961, University Library of Munich, Germany, revised Apr 2008.
    8. Balogun, Emmanuel Dele, 2009. "Determinants of West African Monetary Zone (WAMZ)countries global export trade: do foreign reserves and independent exchange rates matter?," MPRA Paper 12929, University Library of Munich, Germany.
    9. Paul Alagidede & George Tweneboah & Anokye M. Adam, 2008. "Nominal Exchange Rates and Price Convergence in the West African Monetary Zone," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 7(3), pages 181-198, December.
    10. repec:ags:hiiedp:26257 is not listed on IDEAS
    11. Steven K. Buigut & Neven T. Valev, 2006. "Eastern and Southern Africa Monetary Integration: A Structural Vector Autoregression Analysis," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 10(4), pages 586-603, November.
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