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A Global Var Analysis Of Global And Regional Shock Spillovers To West African Countries

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  • ABDULSALAM ABIDEMI SIKIRU

    (Research and Statistics Department, West African Monetary Agency, Sierra Leone†Monetary Policy Department, Central Bank of Nigeria, Nigeria)

  • AFEES A. SALISU

    (��Centre for Econometric & Allied Research, University of Ibadan, Ibadan, Nigeria§Global Humanistic University, Curacao)

Abstract

Motivated by the drive to achieve monetary union in the Economic Community of West African States (ECOWAS), the vulnerability of member countries to global and regional shocks is examined, using the global VAR (GVAR) framework so constructed for the purpose. The global shocks are those due to global commodity prices, oil and food prices, while the regional shocks capture the influence of their major trading partners; the United States (US) and China. We estimate a 59-unit GVAR model comprising advanced and emerging economies. Two findings are discernible from the results. First, the constituent countries are vulnerable to both global and regional shocks. Second, after grouping the countries into two recognized divisions [i.e., the West African Economic and Monetary Union (WAEMU) and West African Monetary Zone (WAMZ)], we find significant variations in their response to shocks. These findings have implications on the common monetary zone agenda for the region, particularly as regards to the heterogeneous response and vulnerability of the constituent countries to shocks. Resolving such vulnerabilities is a major requirement for the success of a monetary union.

Suggested Citation

  • Abdulsalam Abidemi Sikiru & Afees A. Salisu, 2024. "A Global Var Analysis Of Global And Regional Shock Spillovers To West African Countries," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 69(02), pages 543-566, March.
    • Handle: RePEc:wsi:serxxx:v:69:y:2024:i:02:n:s0217590821410034
    DOI: 10.1142/S0217590821410034
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    More about this item

    Keywords

    ECOWAS; GVAR; shock transmission; macro-economy; optimal currency;
    All these keywords.

    JEL classification:

    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F15 - International Economics - - Trade - - - Economic Integration

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