Policy coordination framework for the proposed monetary union in ECOWAS

Abstract

There is no doubt that regional economic integration and eventual monetary union would be generally beneficial to the economies of West Africa. Each country in the sub-region conceptualizes and implements its own monetary, fiscal and exchange rate policies, among others. There have been attempts in recent years by some countries to design such policies in line with efforts to meet both primary and secondary criteria for convergence. However, these policies seem not to be properly coordinated. They remain country specific and focused thus defeating the essence of moving towards a monetary union. This paper attempts to shows analytically that stability can be achieved through monetary union but at a cost; loss of ability to exploit monetary policy to boost output. However, effective risk-sharing mechanisms and economic policy coordination within a holistic framework would smooth the process towards a successful monetary union.