West African Currency Unions: Rationale and Sustainability

Xavier Debrun, Paul Masson and Catherine Pattillo

CESifo Economic Studies, 2003, vol. 49, issue 3, 381-413

Abstract: Drawing on the recent literature and experience of monetary integration in Europe, the paper examines the rationale for establishing regional currency unions in western Africa. Despite dramatic economic, political and historical differences between the two regions, the analysis indicates that monetary unification might well be beneficial for a number of the member states of the Economic Community of West African States (ECOWAS). The main reason is that the costs stemming from the loss of monetary autonomy are often more than offset by the gains originating in the (partial) separation of monetary and fiscal powers. However, large countries with relatively ambitious public expenditure objectives would not be attractive partners because they would be expected to pressure the common central bank, creating excessive inflation in the entire union. Hence, the desirability and sustainability of a currency union critically depends on fiscal discipline among its members. We also explore the vulnerability of regional monetary institutions to country-specific disturbances. Overall, the desirability of an ECOWAS monetary union requires a strong fiscal surveillance procedure both in the transition phase and after the establishment of the union. (JEL E58, E61, F42)

Date: 2003
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://hdl.handle.net/10.1093/cesifo/49.3.381 (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:oup:cesifo:v:49:y:2003:i:3:p:381-413.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

CESifo Economic Studies is currently edited by Panu Poutvaara

More articles in CESifo Economic Studies from CESifo Group Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().