Enjeux du projet de monnaie unique CEDEAO[Implications of the ECOWAS single currency project]

This paper deals with challenges surrounding the upcoming single currency in the ECOWAS area. After suffering many postponements due to insufficient preparation and lack of political will, significant progress has been made recently with important decisions such as the name and symbol of the future currency being chosen and monetary policy framework for the future central bank as well as the exchange rate regime. ECOWAS shows a high degree of heterogeneity in the economic structures of its member states. Moreover, there are discrepancies between countries regarding their performances in meeting the convergence criteria. To that extent, WAEMU countries do better than WAMZ members. In order to assess the opportunity of joining a monetary union, a new Keynesian model is used to compare countries’ welfare losses as members of the future union to their current situation. Results show that ECOWAS is not an optimal monetary area confirming conclusions drawn by previous studies, shocks being highly asymmetric. Furthermore welfare losses are limited to 0.03% for the future union against 1.69% for Nigeria, 0.51% for Ghana, and 0.52% for the Gambia. WAEMU member states and Cabo Verde do better individually with respectively 0.003% and 0.002. WAMZ countries would benefit more from the future union though the welfare loss associated with single currency area is still reasonable. The single currency objective should be still pursued in light of the region’s strong potential and the important benefits from transaction costs reduction. To that extent, convergence criteria constraints should be relaxed while compensating the losers to enable a rapid entry into force.