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Monetary and Economic Union in West Africa: An analysis on trade

Author

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  • Isaac Mensah

    (PhD Candidate, Department of Economics, Ca' Foscari University of Venice, Venice, Italy)

Abstract

Purpose - This paper makes an analysis of trade in the WAMZ as well as the WAMZ's trade with other countries in West Africa, Europe and Asia based on the Optimal Currency Area (OCA) theory. This theory first proposed by Mundell (1961) as a basis for evaluating whether or not an area constitutes an optimal currency area is exploited in assessing whether or not the WAMZ constitutes an OCA. Methodology/Design/Approach - Data utilized for the trend analysis were sourced from the World Bank's World Development in dicator (WDI) and annual reports of the central bank of each WAMZ member country considered. The data spans from 2002 to 2013 and it covers five (5) WAMZ member countries. Similarly, data for the trade analysis was sourced from the World Bank's World Integrated Trade Solution (WITS) and it for the period 2000 to 2012. Findings - While, I found strong evidence against trade symmetry in the WAMZ, there are some evidence of marginal convergence in inflation, real GDP growth and monetary policy rate. Moreover, while I found reasons to believe that the convergence is partially as a result of the convergence criteria, trade in WAMZ remains significantly low and more so for WAMZ's trade in West Africa. Originality/value - This paper concludes that on the basis of trade, WAMZ does not qualify as an OCA. This means that more time is needed for convergence of intra WAMZ trade and in this regard, this paper supports the WAMI's declaration of achieving integration in the year 2020.

Suggested Citation

  • Isaac Mensah, 2015. "Monetary and Economic Union in West Africa: An analysis on trade," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 8(2), pages 87-118, October.
    • Handle: RePEc:tei:journl:v:8:y:2015:i:2:p:87-118
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    References listed on IDEAS

    as
    1. Chuku, Chuku, 2012. "The proposed eco: should West Africa proceed with a common currency?," MPRA Paper 43739, University Library of Munich, Germany.
    2. Xavier Debrun & Paul Masson & Catherine Pattillo, 2005. "Monetary union in West Africa: who might gain, who might lose, and why?," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 454-481, May.
    3. Mahvash Saeed Qureshi & Charalambos G. Tsangarides, 2011. "Exchange Rate Regimes and Trade: Is Africa Different?," WIDER Working Paper Series wp-2011-014, World Institute for Development Economic Research (UNU-WIDER).
    4. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 15(30), pages 08-45.
    5. John Whalley, 1998. "Why Do Countries Seek Regional Trade Agreements?," NBER Chapters, in: The Regionalization of the World Economy, pages 63-90, National Bureau of Economic Research, Inc.
    6. Qureshi, Mahvash Saeed & Tsangarides, Charalambos G., 2012. "Hard or Soft Pegs? Choice of Exchange Rate Regime and Trade in Africa," World Development, Elsevier, vol. 40(4), pages 667-680.
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    Cited by:

    1. Abban, Stanley, 2020. "Currency Union as a Panacea for ills in Africa: A New Institutional Framework and Theoretical Consideration," MPRA Paper 105459, University Library of Munich, Germany.

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    More about this item

    Keywords

    Integration; monetary union; convergence criteria; WAMZ;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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