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

Romain Houssa

No 2004-17, CSAE Working Paper Series from Centre for the Study of African Economies, University of Oxford

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 shock with the VAR model. We discuss the limits 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 positively or less negatively correlated between West African countries. These conclusions imply some policy recommendations for the monetary union project in West Africa.

Keywords: Asymmetric Shocks; Monetary Union; Factor Model (search for similar items in EconPapers)
JEL-codes: C33 E52 E58 F42 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (4)

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Working Paper: Monetary Union in West Africa and Asymmetric Shocks: a Dynamic Structural Factor Model (2004)
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