Is the Economic Community of West African States an optimal monetary zone?

Summary This doctoral thesis empirically studies monetary optimality in ECOWAS. It is subdivided into four chapters and is based on a dynamic approach to the theory of Optimal Currency Areas (OCAs). Chapter 1 shows that the traditional theory of OMZs does not allow for a credible and clear-cut judgment on the capacity of West African states to form an optimal monetary space. It also highlights the ambiguity of the results obtained in previous empirical work. However, this work is dated and most of it is static and omits structural changes that may occur in the zone. Chapter 2 analyzes the degree of asymmetry of shocks within ECOWAS. We show that the region's economies are marked by relatively high degrees of asymmetries. However, we emphasize the need for a dynamic analysis of shocks because a monetary union that is considered costly at the outset may become beneficial over time. Chapter 3 identifies the determinants of business cycle synchronization in ECOWAS. We show that bilateral trade and financial integration are determinants of business cycle synchronization in the region. Furthermore, we show that the single currency increases business cycle synchronization through bilateral trade. Chapter 4 analyzes income and consumption smoothing mechanisms within ECOWAS. We show that official development assistance and gross savings help to smooth asymmetric shocks between ECOWAS countries. Furthermore, we show that although the degree of risk sharing has increased over time, it remains low. Thus, the creation of a fiscal fund could provide an additional tool to mitigate asymmetric shocks in the region.