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The proposed eco: should West Africa proceed with a common currency?

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  • Chuku, Chuku

Abstract

This paper investigates the rationality of proceeding with a common currency in West Africa by testing for symmetry and speed of adjustment to four underlying structural shocks among a pair of 66 ECOWAS economies. The findings reveal that there is relatively high degree of symmetry in the responses of the economies to external disturbances, while about 85 percent of the correlations in supply, demand and monetary shocks among the countries are asymmetric. The size of the shocks and speed of adjustment among countries are also dissimilar, suggesting that ECOWAS should not yet proceed with the eco, since the costs will outweigh the benefits.

Suggested Citation

  • Chuku, Chuku, 2012. "The proposed eco: should West Africa proceed with a common currency?," MPRA Paper 43739, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:43739
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    File URL: https://mpra.ub.uni-muenchen.de/43739/1/MPRA_paper_43739.pdf
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    References listed on IDEAS

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    3. Saxena, Sweta Chaman, 2005. "Can South Asia adopt a common currency?," Journal of Asian Economics, Elsevier, pages 635-662.
    4. Bayoumi, Tamim & Ostry, Jonathan D, 1997. "Macroeconomic Shocks and Trade Flows within Sub-Saharan Africa: Implications for Optimum Currency Arrangements," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(3), pages 412-444, October.
    5. M. Ayhan Kose & Raymond Riezman, 2013. "Trade shocks and macroeconomic fluctuations in Africa," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 19, pages 369-394 World Scientific Publishing Co. Pte. Ltd..
    6. Fielding, David & Shields, Kalvinder, 2001. "Modelling macroeconomic shocks in the CFA Franc Zone," Journal of Development Economics, Elsevier, pages 199-223.
    7. Xavier Debrun & Paul Masson & Catherine Pattillo, 2005. "Monetary union in West Africa: who might gain, who might lose, and why?," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 454-481, May.
    8. Alagidede, Paul & Coleman, Simeon & Cuestas, Juan Carlos, 2012. "Inflationary shocks and common economic trends: Implications for West African monetary union membership," Journal of Policy Modeling, Elsevier, vol. 34(3), pages 460-475.
    9. Buigut, Steven K. & Valev, Neven T., 2005. "Is the proposed East African Monetary Union an optimal currency area? a structural vector autoregression analysis," World Development, Elsevier, pages 2119-2133.
    10. 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.
    11. Houssa, Romain, 2008. "Monetary union in West Africa and asymmetric shocks: A dynamic structural factor model approach," Journal of Development Economics, Elsevier, pages 319-347.
    12. Tsangarides, Charalambos G. & Qureshi, Mahvash Saeed, 2008. "Monetary Union Membership in West Africa: A Cluster Analysis," World Development, Elsevier, vol. 36(7), pages 1261-1279, July.
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    14. Alexander W. Hoffmaister & Jorge E. Roldós & Peter Wickham, 1998. "Macroeconomic Fluctuations in Sub-Saharan Africa," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 132-160, March.
    15. Etienne B Yehoue, 2005. "On the Pattern of Currency Blocs in Africa," IMF Working Papers 05/45, International Monetary Fund.
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    Citations

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    Cited by:

    1. Ekpo Akpan & Chuku Chuku, 2017. "Working Paper 291 - Regional Financial Integration and Economic Activity in Africa," Working Paper Series 2403, African Development Bank.
    2. Coulibaly, Issiaka & Gnimassoun, Blaise, 2013. "Optimality of a monetary union: New evidence from exchange rate misalignments in West Africa," Economic Modelling, Elsevier, vol. 32(C), pages 463-482.
    3. Isaac Mensah, 2015. "Monetary and Economic Union in West Africa: An analysis on trade," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 8(2), pages 87-118, October.

    More about this item

    Keywords

    Monetary union; Structural VAR; Optimal currency area; ECOWAS; West Africa;

    JEL classification:

    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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