Monetary Union in West Africa and Asymmetric Shocks: a Dynamic Structural Factor Model

Romain Houssa

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: We analyse the costs of a monetary union in West Africa by means of asymmetric aggregate demand and aggregate supply shocks. Previous studies have estimated the shocks with the VAR model. We discuss the limitations of this approach and apply a new technique based on the dynamic factor model. The results suggest the presence of economic costs for a monetary union in West Africa because aggregate supply shocks are poorly correlated or asymmetric across these countries. Aggregate demand shocks are more correlated between West African countries.

Date: 2004-03
New Economics Papers: this item is included in nep-afr, nep-cba, nep-mac, nep-mon and nep-opm
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Working Paper: Monetary Union in West Africa and Asymmetric Shocks: A Dynamic Structural Factor Model (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces0411

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