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How Feasible is the West African Eco Currency Union? A New Approach

34 Pages Posted: 27 Jun 2015  

William Miles

Wichita State University - W. Frank Barton School of Business

Date Written: June 25, 2015

Abstract

A recent proposal to expand the CFA Franc zone in West Africa would create a currency union that, in terms of population, would rival the Euro. This new currency union would include Nigeria, which would have the largest GDP, and which is also, unlike most other current and proposed members, heavily dependent on oil exports. Synchronization of business cycles across the nations of this new monetary union would be important in assuring its feasibility. In this paper, we apply a recently developed set of tools and find, first, that by some salient measures, the proposed nations in this union exhibit less business cycle coherence than those of the euro zone prior to its launch. Secondly, Nigeria seems especially ill-suited for this new currency. Finally, it does not appear, based on the experience of several nations, that the act of joining the currency union increases business cycle synchronization, contrary to the “Endogenous Optimal Currency Area” hypothesis.

Keywords: Macroeconomic Analyses of Economic Development, Business Fluctuations, Macroeconomic Issues of Monetary Unions

JEL Classification: E32, F45, O11

Suggested Citation

Miles, William, How Feasible is the West African Eco Currency Union? A New Approach (June 25, 2015). Available at SSRN: https://ssrn.com/abstract=2623295 or http://dx.doi.org/10.2139/ssrn.2623295

William Miles (Contact Author)

Wichita State University - W. Frank Barton School of Business ( email )

1845 N. Fairmount
Wichita, KS 67260
United States

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