Abstract
There is apparently non-sychronization of business cycles in the
Economic Community of West African States (ECOWAS). This
may likely threaten the effectiveness of the monetary union. This
study investigated the viability of a stable West African monetary
union in the ECOWAS region. The study used the Ghosh-Wolf
output loss function after de-trending the annual growth rates of
real GDP from 1975 to 2015, using Baxter-King filter approach.
The results indicate that smaller economies in the region (Cape
Verde, Gambia, Sierra Leone and Mali) will compromise the
stability of the union because their cost of pursuing a common
stabilization policy will be very high, while larger economies
(Nigeria and Ghana) will incur relatively low cost compared to
the other groups. Also, the output losses of WAEMU economies
fall within a particular range and are relatively lower compared
to that of smaller economies in the region probably because they
pursue a common stabilization policy. The implication of these
findings is that the stability of the envisaged West African
monetary union is likely to be compromised since smaller
economies in the region will be worse-off than larger economies.
Thus, in order not to compromise the stability,smaller economies
should not be admitted at the initial stage of the union until they
satisfy all the criteria.
Abdullahi Zakari Yahaya, Louis Sevitenyi Nkwatoh. (2020) Viability of a Stable West African Monetary Union, Empirical Economic Review, Volume 3, Issue 1.
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