On the Adequacy of Monetary Arrangements in Sub-Saharan Africa
Paris School of Economics (University Paris 1)
Ecole Normale Superieure de Cachan; ENSAE
The World Economy, Vol. 28, No. 3, pp. 349-373, March 2005
We examine the economic rationale for monetary union(s) in Sub-Saharan Africa through the use of cluster analysis on a sample of 17 countries. The variables used stem from the theory of optimum currency areas and from the fear-of-floating literature. It is found that the existing CFA franc zone cannot be viewed as an optimum currency area: CEMAC and UEMOA countries do not belong to the same clusters, and a 'core' of the UEMOA can be defined on economic grounds. The results support the inclusion of the Gambia, Ghana and Sierra Leone in an extended UEMOA arrangement, or the creation of a separate monetary union with the 'core' of the UEMOA and the Gambia, rather than the creation of a monetary union around Nigeria. Finally, the creation of the West African Monetary Zone (WAMZ) around Nigeria is not supported by the data.
Number of Pages in PDF File: 25Accepted Paper Series
Date posted: March 23, 2005
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