Academic journal article Journal of Economic Cooperation & Development

Convergence of Growth Rates in the West African Monetary Zone

Academic journal article Journal of Economic Cooperation & Development

Convergence of Growth Rates in the West African Monetary Zone

Article excerpt

Abstract

There have been a number of failed attempts by policy makers in West Africa to launch a second common currency, the Eco, over the past decade. This in turn has raised a number of questions about the sustainability of the proposed second monetary union within the Economic Community of West African States (ECOWAS). While most of the issues are self-inflicted, the main culprit is a lack of proper analysis of the underlying factors that ought to be considered before forging ahead with the proposed currency union. This paper contributes to the debate by establishing the extent of convergence and synchronisation of business cycles within the West African Monetary Zone (WAMZ). Both univariate and multivariate unobserved components models are employed to decompose the annual real GDP series of five countries into their cyclical and permanent components from 1970 to 2011. The results suggest dissimilarities in business cycles within the sub-region. …

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