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

  • Chuku, Chuku

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.

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File URL: http://mpra.ub.uni-muenchen.de/43739/1/MPRA_paper_43739.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 43739.

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Date of creation: 07 Mar 2012
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Handle: RePEc:pra:mprapa:43739
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  1. Sweta C. Saxena, 2005. "Can South Asia Adopt a Common Currency?," International Finance 0508001, EconWPA.
  2. 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.
  3. Kose, M. Ayhan & Riezman, Raymond, 2001. "Trade shocks and macroeconomic fluctuations in Africa," Journal of Development Economics, Elsevier, vol. 65(1), pages 55-80, June.
  4. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. 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.
  6. Fielding, David & Shields, Kalvinder, 2001. "Modelling macroeconomic shocks in the CFA Franc Zone," Journal of Development Economics, Elsevier, vol. 66(1), pages 199-223, October.
  7. Alexander W. Hoffmaister, 1997. "Macroeconomic Fluctuations in Sub-Saharan Africa," IMF Working Papers 97/82, International Monetary Fund.
  8. 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, vol. 33(12), pages 2119-2133, December.
  9. 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.
  10. Tamim Bayoumi & Jonathan David Ostry, 1995. "Macroeconomic Shocks and Trade Flows within Sub-Saharan Africa; Implications for Optimum Currency Arrangements," IMF Working Papers 95/142, International Monetary Fund.
  11. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
  12. Etienne B. Yehoue, 2005. "On the Pattern of Currency Blocs in Africa," IMF Working Papers 05/45, International Monetary Fund.
  13. 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.
  14. 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.
  15. 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.
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