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On the desirability of the West African monetary union

Author

Listed:
  • Carl Grekou

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Cécile Couharde

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Valérie Mignon

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper, we investigate from a policy coordination viewpoint the desirability of the West African monetary union project, ECO. Our approach is built around the inclusion of national objectives in the regional integration perspective. Thanks to cluster analysis, we identify two groups of countries with relatively homogenous sustainable exchange rate paths in West Africa. We also find that no single currency peg nor a freely floating exchange rate regime would be preferable for any of the countries or groups of economies. Overall, our findings argue in favor of two ECOs —at least in a first step, i.e., one for each of the two identified zones. Each ECO would serve as a virtual anchor —with some flexibility— for the considered group, and would be determined by a basket of currencies mainly composed of euro and US dollar.

Suggested Citation

  • Carl Grekou & Cécile Couharde & Valérie Mignon, 2021. "On the desirability of the West African monetary union," Working Papers hal-04159755, HAL.
    • Handle: RePEc:hal:wpaper:hal-04159755
    Note: View the original document on HAL open archive server: https://hal.science/hal-04159755
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    References listed on IDEAS

    as
    1. Coudert, Virginie & Couharde, Cécile & Grekou, Carl & Mignon, Valérie, 2020. "Heterogeneity within the euro area: New insights into an old story," Economic Modelling, Elsevier, vol. 90(C), pages 428-444.
    2. Schröder, Marcel, 2013. "Should developing countries undervalue their currencies?," Journal of Development Economics, Elsevier, vol. 105(C), pages 140-151.
    3. Chuku, Chuku, 2012. "The proposed eco: should West Africa proceed with a common currency?," MPRA Paper 43739, University Library of Munich, Germany.
    4. Couharde, Cécile & Delatte, Anne-Laure & Grekou, Carl & Mignon, Valérie & Morvillier, Florian, 2018. "EQCHANGE: A world database on actual and equilibrium effective exchange rates," International Economics, Elsevier, vol. 156(C), pages 206-230.
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    More about this item

    Keywords

    Monetary integration; West Africa; CFA franc zone; ECOWAS.;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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