Is WAMZ an Optimum Currency Area?
- January 12, 2020
- Posted by: RSIS
- Categories: Economics, IJRSI
International Journal of Research and Scientific Innovation (IJRSI) | Volume VI, Issue XII, December 2019 | ISSN 2321–2705
Is WAMZ an Optimum Currency Area?
Chukwuemeka Amaefule
Department of Economics, Faculty of Social Sciences, University of Port Harcourt, Nigeria
Abstract: This study empirically investigates the existence of symmetry and asymmetry in West African Monetary Zone (WAMZ) using Wald F-test. Data obtained from World Development Indicators from 1970-2017 were employed for this study. The study was carried out under pooled and country-specific study. Purposive sampling technique was employed to select countries for country-specific study. The result showed that symmetry exists in pooled study, and both symmetry and asymmetry exist in WAMZ. The result implies that WAMZ is entirely not an optimum currency Area (OCA). WAMZ is a quasi-OCA. Thus, WAMZ authorities should accelerate functional economic system that would absorb shock and a system that would strengthen productivity and capacity of WAMZ to gain market share in order to forestall Eco-currency from value volatility.
Keywords: Symmetric and Asymmetric, Shock, ECOWAS, WAMZ and OCA
I. INTRODUCTION
The works of De Grauwe and Vanhaverbeke (1993) and Harvey and Cushing (2015) are two important literature that this study builds on to address the issues of whether WAMZ is an optimum currency area. This issue had been previously taken-up by Harvey and Cushing (2015), the point of departure is on instrument employed in this study; Wald-F test while SVAR was employed hitherto. Before we delve into this discourse, it is imperative to appropriately situate ECOWAS/WAMZ economic integration by extending the debate on symmetry and asymmetry in relations to whether WAMZ is a common currency area? The issue of economic integration is an important subject that has received robust attention following the Maastricht treaty that birthed European Union in 1999. The prototype of economic and monetary arrangement in European Union is such that involves the use and application of single currency called Euro. Economic and Monetary Union (EMU) in Europe has been a model for countries desiring to foster common currency union.
