Correlations of structural shocks, dynamic responses of output and inflation to commodities price shocks and monetary union in WAMZ

Yahuza Abdul Rahman, Anthony Kofi Osei-Fosu and Daniel Sakyi ()

African Journal of Economic and Management Studies, 2023, vol. 15, issue 3, 419-439

Abstract: Purpose - This paper examines correlations of the underlying structural shocks and the degree of synchronization in the impulse responses of output, inflation and trade to a one standard deviation shock to non-oil commodities price index and exchange rates within the West African Monetary Zone (WAMZ) countries from 1990q1 to 2020q1. Design/methodology/approach - This paper uses the structural vector autoregressive model to isolate the underlying structural shocks and compares them with the West African Monetary Union (WAEMU) countries. Findings - Findings from the study suggest that correlations of underlying structural shocks are more profound in the WAEMU than in the WAMZ. Impulse responses of output to price and exchange rate shocks are more symmetric in the WAEMU than in the WAMZ. However, impulse responses of inflation to price and exchange rate shocks are symmetric in the WAMZ than in the WAEMU and responses of trade in both sub-groups are not uniform. Practical implications - The paper concludes that the WAMZ does not constitute an Optimum Currency Area concerning the correlations of the structural shocks and output. However, it has achieved convergence in inflation and there are adequate adjustment mechanisms to shocks in the WAMZ than in the WAEMU. Therefore, the WAMZ may not suffer from joining the monetary union. Thus, economic Community of West African States may take steps to roll out the monetary union. Originality/value - The paper examines correlations of the underlying structural shocks, impulse responses of output and inflation to shocks to commodities price and exchange rates in the WAMZ and compares them with the WAEMU.

Keywords: Optimum currency areas; Commodities price shocks; Symmetric shocks; West African Monetary Zone; C32; E32; F02; F15 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-04-2023-0129

DOI: 10.1108/AJEMS-04-2023-0129

Access Statistics for this article

African Journal of Economic and Management Studies is currently edited by Prof John Kuada

More articles in African Journal of Economic and Management Studies from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().