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West African Monetary Integration and Interstates Risk-Sharing

Listed author(s):
  • Sampawende Jules TAPSOBA

    ()

    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

There are continuing efforts at the monetary integration and unionization in West Africa. Several academics argue that a monetary union among West African states would be costly because of the magnitude of asymmetric shocks. A common monetary policy is inappropriate and ineffective to respond to divergent shocks. Therefore, the stability of such a union is critically dependent on risk-sharing mechanisms for achieving income insurance and consumption smoothing. A monetary union is still optimal if output stabilization mechanisms such as risk-sharing institutions, are in place to cope with asymmetric shocks. This article estimates risk-sharing channels among West African states from 1970 to 2004. It uses the definition of national accounts to measure the fraction of asymmetric output shocks smoothed via net factors income, net transfers and net saving. We find that compared to the OECD (Organization for Economic Cooperation and Development) estimates, the degree of risk-sharing among West African countries is quite low. We also obtain that net saving is the significant and stable risk-sharing channel. A further analysis shows that only the contribution of public saving is significant.

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File URL: http://publi.cerdi.org/ed/2010/2010.02.pdf
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Paper provided by CERDI in its series Working Papers with number 201002.

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Length: 21
Date of creation: 2010
Handle: RePEc:cdi:wpaper:1120
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  1. 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.
  2. Sorensen, Bent E. & Yosha, Oved, 1998. "International risk sharing and European monetary unification," Journal of International Economics, Elsevier, vol. 45(2), pages 211-238, August.
  3. Pierfederico Asdrubali & Bent E. Sørensen & Oved Yosha, 1996. "Channels of Interstate Risk Sharing: United States 1963–1990," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1081-1110.
  4. Bent E. S�rensen & Oved Yosha, 1998. "International Risk Sharing and European Monetary Unification," Temi di discussione (Economic working papers) 327, Bank of Italy, Economic Research and International Relations Area.
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