Competitiveness, Capital Movement Inward, and Eco Economic and Monetary Union in WAMZ

International Journal of Research and Scientific Innovation (IJRSI) | Volume VI, Issue XII, December 2019 | ISSN 2321–2705

Competitiveness, Capital Movement Inward, and Eco Economic and Monetary Union in WAMZ

Chukwuemeka Amaefule

Department of Economics, Faculty of Social Sciences, University of Port Harcourt, Nigeria

Abstract:- This unbalanced panel study employed Pool Mean Group (PMG) estimator to determine the impact of capital movement inward on internal competitiveness and external competitiveness of West African Monetary Zone (WAMZ). Data from World Development Indicators were sourced for period covering 1970 to 2017. The result showed that FDI has a positive impact on the internal and external competitiveness of WAMZ, ODA has negative impact on the internal and external competitiveness of WAMZ; and IBRD loan has negative impact on internal competitiveness and positive impact on external competitiveness. The result showed that the speed of adjustment though negative is not significant save for trade%GDP. The dual impact of capital movement inward on competitiveness implies that full capital account liberalization policy of WAMZ is not entirely effective to guarantee long-run convergence in WAMZ. In conclusion, capital movement inward e.g. FDI variables affect the capacity of WAMZ to achieve long-run convergence. There should be obvious reforms in WAMZ to accelerate market fundamentals necessary to ensure that inward capital movement improves internal and external competitiveness required to accelerate the achievement of macroeconomic convergence criteria (MCC) in terms of Real GDP and external reserves (trade growth) to sustain Eco EMU beyond 2020.

Keywords: Optimum Currency Area, Competitiveness, Economic and Monetary Union (EMU), Capital Movement Inward, Trade and Real GDP.

JEL classification: F2, F4, F13, F14

I. INTRODUCTION

The potential assumptions held by WAMZ authorities as it relates to the long-run realization of convergence (modified gradualist approach) could be premised on the argument put forward by the expost Optimum Currency Area (OCA) theory (Frankel and Rose, 1997). Overtime, WAMZ has developed concerted strategies e.g. financial and trade integration strategies, to achieve macroeconomic convergence exemplified by the exante OCA theory e.g. Mundell (1961), McKinnon (1963), Ingram (1973), Kenen (1969) with essential success. Regrettably, WAMZ has been plagued with inconsistencies in 2005, 2009, 2011 and 2015 to achieve its Macroeconomic Convergence Criteria (MCC). However, much convergence targets needs to be achieved for WAMZ to be considered an economic and monetary union (EMU) sufficient to adopt Eco currency.

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