Economic Community of West African States (ECOWAS) : is it an optimum currency area?

Thesis: This Ph.D. dissertation empirically investigates the optimality of a single currency in ECOWAS. It is subdivided into 4 chapters and is part of a dynamic approach to the theory of Optimum Currency Area (OCA). Chapter 1 shows that the traditional theory of OCA has not made it possible to make a credible and decisive judgement on the ability of West African states to form an OCA. In addition, it highlights the ambiguity of the results obtained in previous empirical works. However, these works are dated and the majority of them are static and omit the structural changes likely to occur in the area. Chapter 2 analyzes the degree of asymmetry of shocks within ECOWAS. We show that the economies of the region are marked by relatively high degrees of asymmetry. However, we stress the need to take into account the dynamic aspect of shocks, since a monetary union considered from the outset as costly can over time become beneficial. Chapter 3 identifies the determinants of synchronization of business cycles in ECOWAS. We show that bilateral trade and financial integration are determinants of the synchronization of business cycles in the region. In addition, we show that single currency increases the synchronization of business cycles through bilateral trade. Chapter 4 explores income and consumption smoothing patterns among ECOWAS. We show that official development assistance and gross savings smooth out asymmetric shocks between ECOWAS countries. Moreover, we show that even if the degree of risksharing has increased over time, it has remains limited. Thus, the creation of a supranational fiscal could provide an additional tool to mitigate asymmetric shocks in the region.

Author(s)

Stéphane Zouri

Date of publication
  • 2020
Keywords
  • Asymmetric shocks
  • Business cycles synchronization
  • Risk-sharing
  • Monetary union
  • Trade integration
  • Financial integration
  • ECOWAS
Issuing body(s)
  • Université Panthéon-Sorbonne – Paris I
Date of defense
  • 09/07/2020
Thesis director(s)
  • Jean-Bernard Chatelain
Version
  • 1