Choice of Monetary and Exchange Regimes in ECOWAS: An Optimum Currency Area Analysis
Patrick Osakwe () and
Shandre M. Thangavelu
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Chantal Dupasquier: UN Economic Commission for Africa
Shandre M. Thangavelu: Department of Economics, National University of Singapore
SCAPE Policy Research Working Paper Series from National University of Singapore, Department of Economics, SCAPE
There are plans by five West African countries to establish a second monetary zone in the sub-region by December 2009. In this paper we ask whether a monetary union is the appropriate exchange rate regime for the sub-region based on economic criteria. We address the issue using a rigorous theoretical framework that captures the crucial trade-off between the savings in transaction costs, resulting from a common currency, and the macroeconomic stabilization benefits of a flexible exchange rate regime. The main result is that a flexible exchange rate regime dominates a monetary union in the ECOWAS subregion.
Keywords: Exchange rates; Regimes; Welfare; Transaction costs; West Africa (search for similar items in EconPapers)
JEL-codes: E52 F33 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-cba, nep-fmk, nep-ifn, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:sca:scaewp:0510
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