On the economic desirability of the West African monetary union: Would one currency fit all?

Cécile Couharde (), Carl Grekou and Valérie Mignon ()

Economic Modelling, 2022, vol. 113, issue C

Abstract: This paper investigates whether the West African nations will benefit from forming the ECO currency union. Using data from 15 countries over the 1999–2018 period, we assess heterogeneity between economies in terms of equilibrium exchange rates —i.e., the level of exchange rates consistent with the absence of macroeconomic disequilibria. Then, we address the sustainable exchange rate regime issue by evaluating whether the ECO should be pegged, freely floating, or something in between. We identify two homogenous groups of economies and find that neither a single currency peg nor a freely floating exchange rate regime would be preferable for any country or group of economies. Overall, our findings argue in favor of two ECOs, one for each of the two identified zones. Each ECO would serve as a virtual anchor for the considered group and would be determined by a basket of currencies mainly composed of euro and US dollar.

Keywords: Monetary integration; West africa; CFA franc Zone; ECOWAS (search for similar items in EconPapers)
JEL-codes: C38 F33 F45 O55 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: On the economic desirability of the West African monetary union: would one currency fit all? (2022)
Working Paper: On the economic desirability of the West African monetary union: would one currency fit all? (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:113:y:2022:i:c:s0264999322001353

DOI: 10.1016/j.econmod.2022.105889

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