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An Interim Arrangement towards Monetary Unification in the West African Monetary Zone

Author

Listed:
  • Joseph K. Asenso

    (Ministry of Finance and Economic Planning, Ghana, PO Box M 40, Ministries – Accra, Ghana. E-mail:joekas75@yahoo.com)

Abstract

The study seeks to establish the presence, or otherwise, of real exchange rate, demand and supply shocks synchronicity in the West African Monetary Zone (WAMZ) and to suggest alternative exchange rate arrangements, other than a monetary union, in case these shocks do not co-move. On the whole, the study finds that the countries experience asymmetric demand, supply and real exchange rate shocks leading to the conclusion that the planned monetary union objective must be put on hold until they achieve shocks co-movement. To this end, the study recommends that the WAMZ operates an exchange rate mechanism (ERM) with the euro as the anchor currency, in the intervening period, to help stabilise the macroeconomic environment since the euro performs better in explaining its business cycles than the United States dollar. This is in view of the fact that the WAMZ preferred the dollar as the anchor currency in its originally proposed ERM.

Suggested Citation

  • Joseph K. Asenso, 2011. "An Interim Arrangement towards Monetary Unification in the West African Monetary Zone," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 5(4), pages 451-475, November.
    • Handle: RePEc:sae:mareco:v:5:y:2011:i:4:p:451-475
    DOI: 10.1177/097380101100500403
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    References listed on IDEAS

    as
    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. Ms. Catherine A Pattillo & Mr. Paul R Masson, 2001. "Monetary Union in West Africa (ECOWAS)," IMF Occasional Papers 2001/003, International Monetary Fund.
    3. Bank for International Settlements, 2003. "Regional currency areas and the use of foreign currencies," BIS Papers, Bank for International Settlements, number 17.
    4. Michael Ojo, 2003. "Regional currency areas and use of foreign currencies: the experience of West Africa," BIS Papers chapters, in: Bank for International Settlements (ed.), Regional currency areas and the use of foreign currencies, volume 17, pages 140-144, Bank for International Settlements.
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