Is West Africa Monetary Zone a Common Currency Area?
Keywords:
West Africa Monetary Zone, Growth Convergence, Neoclassical Convergence Theory, Panel Data Analysis
Abstract
The integrating units of West Africa Monetary Zone are expected to satisfy nine (9) macroeconomic convergence criteria to kick start the monetary union. This paper examines the possibility of attaining economic growth convergence in the zoneover time, because the success of the former rested on the latter. By growth convergence, it implies that the six economies that made up the zone are presumed to be alike in terms of consumer preferences, techniques of production adopted and economic policies thrust. The result shows an evidence of growth convergence within WAMZ, which is an indication that all member states of WAMZ has common features, this further indicates that, there would be a sparkling light at the end of WAMZ tunnel as regards satisfaction of the nine prerequisite convergence criteria. However, the speed of convergence and half-life are 1.5% and 35years respectively, meaning that much is still expected to be done in term of policy development and regulation to enable the much awaited monetary union. In the light of this, this study recommends that the West Africa Monetary Zone Convergence Council in consultation with the ECOWAS Convergence Council should coordinate both fiscal and monetary policies within the zone. This to a large extent, would hopefully, bring about uniformity in policy measures and implementation and, thereby, foster collaborative effort among the member state to achieve their common goal.
References
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Adamgbe E.T. and Agu C.C. (2012). Monetary Policy Preferences in the West African Monetary Zone: Evidence from Dynamic General Equilibrium Models. Electronic copy available at: http://ssrn.com/abstract=2200319.
Amaefule, C. (2019) 1s WAMZ an Optimum Currency Area? International Journal of Research and Scientific Innovation, 6(12), 263-268.
Angeloni I. & Ehrmann M. (2007). Euro Area Inflation Differentials, Topics in Macroeconomics, 7(1), Article 24.
Asongu, S.A, Nwachukwu, J.C, TchamyouV.S (2016)Aliterature surveyonproposed African Monetary Union. Working paper No. WP/15/042, African Governance and Development Institute (AGDI), Yaoundé.
Bakare-Aremu, T. A. (2016). Financial Liberalisation and Macroeconomic Convergence in West Africa Monetary Zone. An Unpublished PhD Thesis of The Department of Economics, University of Lagos, Nigeria.
Bakare-Aremu, T. A. (2018). Effect of Financial Liberalisation on Macroeconomic Convergence Variables inthe West Africa MonetaryZone. Journal of Social Sciences, (National Open University, Abuja, Nigeria). 2(2), 1-56.
Balogun E.D (2014). Can WAMZ Area Inflation Converge without anex-ante MonetaryPolicy Coordination in the Zone? International Journal of Monetary and Economic Integration, 13(2), 32-65.
Baltagi H.B. (2001). Economic Analysis of Panel Data. Delhi. Wiley and Sons, Incorporated. Calvin M., & Olumide A. (2014). Regional Financial Integration and Monetary Coordination in the West Africa Monetary Zone and the East African Community. The Economist.
Caprio G. & Honohan P. (2000). Banking Crises, the Oxford Handbook of Banking. Oxford University Press, Oxford.
Caselli F, Esquirel, G. & Femando, L (1997). Reopening the Convergence Debate. A New look at Cross Country Growth Empirics. Journal of Economics growth, 1(3), 363– 389.
Easterly, W., Islam, R. & Stiglitz, J. (2001). Shaken and Stirred: Explaining Growth Volatility. Annual World Bank Conference on Development Economics, Washington: World Bank.
Egwuikhide F.O. & Ogunleye E, K ((2011).Globalisation and Macroeconomic Convergence in West African Monetary Zone (WAMZ). Journal of Monetary and Economic Integration 10(1), 89-130.
Elliot S. (2020) West Africa’s new ‘eco’ currency sparks division over timetable and euro peg A CNBC online news.
Ernest E (2005) Regional Currency Areas: Lesson from the West African sub region and Nigeria’s policy stance. BIS working paper no 17.145-150.
GoeiemannW.(2007).Macroeconomic PolicyandInstitutional ConvergenceinMemberStates of Southern African Development Community (SADC). An Economic Commission for Africa, South Africa office, 1-42.
Gujarati D.N. (2004). Basic Econometrics, Fourth Edition, McGraw-Hill Companies
Harvey S. K. & Cushing M J (2015). Is West African Monetary Zone (WAMZ) a common currency area? Review of Development Finance 5(10), 53-63.
Hofmann, B., Remsperger, H. (2005). Inflation Differentials among the Euro Area Countries: Potential Causes and Consequences, Journal of Asian Economics, 16(3), 403-419.
Honohan, P. and Lane, P. (2003). Divergent Inflation Rates in EMU. Journal of Economic Policy, 358- 394.
Islam Nazirul, (1995).Growth Empirics, a Panel Data Approach. The quality Journal of Economics, MIT press, 110 (4), 1127 –1147.
Kenen Peter, (1969). The Theory of Optimum Currency Areas: An Eclectic View.
Kumo W. L. (2011). Growth and Macroeconomic Convergence in Southern Africa, Series N0130, African Development Bank, Tunis, Tunisia.
Lane, P. R. (2000). Asymmetric Shocks and Monetary Policy in the Currency Union. Scandinavian Journal of Economics, 1(2), 585-604.
Latif A.G.D (2010). Convergence and Economic Integration in Africa: The Case of the Franc Zone Countries. Africa Economic Research Consortium,RP 200,.
Maiyaki, T.B (2016) The imperative for a West African Common Currency in the light of the Euro Zone Experience. International Journal of Innovative Research and Development 5(14), 36-40.
Maleke X. N. (2008). Macroeconomic Convergence in the Southern African Custom Union (SACU): A Panel Unit Root Analysis. Economic Development and Policy Issues, University of Johannesburg, South Africa, 1-88.
Mara, P. & André, V. P. (2011). Euro zone Inflation Differentials and the ECB. Research Papers in Economics - REPEC) D/2011/1169/014.www.repec.org
Mundell, R. B (1973), Uncommon Arguments for Common Currencies. The Economics of Common Currencies. Proceedings of the Madrid Conference on Optimum Currencies Area, 114 - 132.
Nnanna, O.J. (2007). Eco Currency: Is a Third Postponement Avoidable? West African Journal of Monetary and Economic Integration 7(1), 1-14.
Ojo, M.O. (2005). Towards a Common Currency in West Africa: Progress, Lessons and Prospect. West African Journal of Monetary and Economic Integration, 5(2), 47-79.
Peterson O.J, Anokye M.A and George. T (2017) Co -Movement of real exchange rates in the West African Monetary Zone. Cogent Economics and Finance 5(1), 1-18.
Popkova, E.G., Egbe, J.O. Akopov S.E & Popovsky S.N. (2012). The Integration of Economic Monetary Policy Systems of West African States; Positive or Negative Implications. .Business and Entrepreneurship Journal, 1 (1) 1-12.
Simon, K.H and Mathew, J.C. (2018) Is West African Monetary Zone (WAMZ) a Common Currency Area? Review of Developmental Finance 5(2015)53-63.
Solow, R.M. (1956). A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics, 70, 65-94.
Swan T.W. (1956). Economic Growth and Capital Accumulation. Economic Record, 32, 334– 361.
Taylor J. A. (2013). Is West Africa Ready for a Common Currency: A study of WAMZ and the Eco, The UCLA Undergraduate Journal of Economics, 1-50, PrincetonUniversity.
Theo V. & Mogi X. (2013).Acquisition Finance and Market Timing “INSEAD”. London School of Economics. Working Paper Series w7325, 1-105.
WAMI (2013) West Africa Monetary Institute, Accra, Macroeconomic Convergence Criteria, (Data Bank), www.wami-imao.org.
WAMI (2016) West Africa Monetary Institute, Accra, West Africa Monetary's Zone Strategic plan (2010- 2015) www.wami.org.
World Bank (2013).World Development Indicator, Washington, Washington D.C: World Bank.
Adamgbe E.T. and Agu C.C. (2012). Monetary Policy Preferences in the West African Monetary Zone: Evidence from Dynamic General Equilibrium Models. Electronic copy available at: http://ssrn.com/abstract=2200319.
Amaefule, C. (2019) 1s WAMZ an Optimum Currency Area? International Journal of Research and Scientific Innovation, 6(12), 263-268.
Angeloni I. & Ehrmann M. (2007). Euro Area Inflation Differentials, Topics in Macroeconomics, 7(1), Article 24.
Asongu, S.A, Nwachukwu, J.C, TchamyouV.S (2016)Aliterature surveyonproposed African Monetary Union. Working paper No. WP/15/042, African Governance and Development Institute (AGDI), Yaoundé.
Bakare-Aremu, T. A. (2016). Financial Liberalisation and Macroeconomic Convergence in West Africa Monetary Zone. An Unpublished PhD Thesis of The Department of Economics, University of Lagos, Nigeria.
Bakare-Aremu, T. A. (2018). Effect of Financial Liberalisation on Macroeconomic Convergence Variables inthe West Africa MonetaryZone. Journal of Social Sciences, (National Open University, Abuja, Nigeria). 2(2), 1-56.
Balogun E.D (2014). Can WAMZ Area Inflation Converge without anex-ante MonetaryPolicy Coordination in the Zone? International Journal of Monetary and Economic Integration, 13(2), 32-65.
Baltagi H.B. (2001). Economic Analysis of Panel Data. Delhi. Wiley and Sons, Incorporated. Calvin M., & Olumide A. (2014). Regional Financial Integration and Monetary Coordination in the West Africa Monetary Zone and the East African Community. The Economist.
Caprio G. & Honohan P. (2000). Banking Crises, the Oxford Handbook of Banking. Oxford University Press, Oxford.
Caselli F, Esquirel, G. & Femando, L (1997). Reopening the Convergence Debate. A New look at Cross Country Growth Empirics. Journal of Economics growth, 1(3), 363– 389.
Easterly, W., Islam, R. & Stiglitz, J. (2001). Shaken and Stirred: Explaining Growth Volatility. Annual World Bank Conference on Development Economics, Washington: World Bank.
Egwuikhide F.O. & Ogunleye E, K ((2011).Globalisation and Macroeconomic Convergence in West African Monetary Zone (WAMZ). Journal of Monetary and Economic Integration 10(1), 89-130.
Elliot S. (2020) West Africa’s new ‘eco’ currency sparks division over timetable and euro peg A CNBC online news.
Ernest E (2005) Regional Currency Areas: Lesson from the West African sub region and Nigeria’s policy stance. BIS working paper no 17.145-150.
GoeiemannW.(2007).Macroeconomic PolicyandInstitutional ConvergenceinMemberStates of Southern African Development Community (SADC). An Economic Commission for Africa, South Africa office, 1-42.
Gujarati D.N. (2004). Basic Econometrics, Fourth Edition, McGraw-Hill Companies
Harvey S. K. & Cushing M J (2015). Is West African Monetary Zone (WAMZ) a common currency area? Review of Development Finance 5(10), 53-63.
Hofmann, B., Remsperger, H. (2005). Inflation Differentials among the Euro Area Countries: Potential Causes and Consequences, Journal of Asian Economics, 16(3), 403-419.
Honohan, P. and Lane, P. (2003). Divergent Inflation Rates in EMU. Journal of Economic Policy, 358- 394.
Islam Nazirul, (1995).Growth Empirics, a Panel Data Approach. The quality Journal of Economics, MIT press, 110 (4), 1127 –1147.
Kenen Peter, (1969). The Theory of Optimum Currency Areas: An Eclectic View.
Kumo W. L. (2011). Growth and Macroeconomic Convergence in Southern Africa, Series N0130, African Development Bank, Tunis, Tunisia.
Lane, P. R. (2000). Asymmetric Shocks and Monetary Policy in the Currency Union. Scandinavian Journal of Economics, 1(2), 585-604.
Latif A.G.D (2010). Convergence and Economic Integration in Africa: The Case of the Franc Zone Countries. Africa Economic Research Consortium,RP 200,.
Maiyaki, T.B (2016) The imperative for a West African Common Currency in the light of the Euro Zone Experience. International Journal of Innovative Research and Development 5(14), 36-40.
Maleke X. N. (2008). Macroeconomic Convergence in the Southern African Custom Union (SACU): A Panel Unit Root Analysis. Economic Development and Policy Issues, University of Johannesburg, South Africa, 1-88.
Mara, P. & André, V. P. (2011). Euro zone Inflation Differentials and the ECB. Research Papers in Economics - REPEC) D/2011/1169/014.www.repec.org
Mundell, R. B (1973), Uncommon Arguments for Common Currencies. The Economics of Common Currencies. Proceedings of the Madrid Conference on Optimum Currencies Area, 114 - 132.
Nnanna, O.J. (2007). Eco Currency: Is a Third Postponement Avoidable? West African Journal of Monetary and Economic Integration 7(1), 1-14.
Ojo, M.O. (2005). Towards a Common Currency in West Africa: Progress, Lessons and Prospect. West African Journal of Monetary and Economic Integration, 5(2), 47-79.
Peterson O.J, Anokye M.A and George. T (2017) Co -Movement of real exchange rates in the West African Monetary Zone. Cogent Economics and Finance 5(1), 1-18.
Popkova, E.G., Egbe, J.O. Akopov S.E & Popovsky S.N. (2012). The Integration of Economic Monetary Policy Systems of West African States; Positive or Negative Implications. .Business and Entrepreneurship Journal, 1 (1) 1-12.
Simon, K.H and Mathew, J.C. (2018) Is West African Monetary Zone (WAMZ) a Common Currency Area? Review of Developmental Finance 5(2015)53-63.
Solow, R.M. (1956). A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics, 70, 65-94.
Swan T.W. (1956). Economic Growth and Capital Accumulation. Economic Record, 32, 334– 361.
Taylor J. A. (2013). Is West Africa Ready for a Common Currency: A study of WAMZ and the Eco, The UCLA Undergraduate Journal of Economics, 1-50, PrincetonUniversity.
Theo V. & Mogi X. (2013).Acquisition Finance and Market Timing “INSEAD”. London School of Economics. Working Paper Series w7325, 1-105.
WAMI (2013) West Africa Monetary Institute, Accra, Macroeconomic Convergence Criteria, (Data Bank), www.wami-imao.org.
WAMI (2016) West Africa Monetary Institute, Accra, West Africa Monetary's Zone Strategic plan (2010- 2015) www.wami.org.
World Bank (2013).World Development Indicator, Washington, Washington D.C: World Bank.
Published
2020-03-01
Section
Articles
