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Monetary union in West Africa and business cycles synchronicity: New evidence
Author(s) -
Simons Daniel,
Jean Louis Rosmy
Publication year - 2018
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12662
Subject(s) - synchronicity , business cycle , dominance (genetics) , economics , currency , china , common currency , international economics , international trade , currency union , economic and monetary union , optimum currency area , european union , monetary economics , macroeconomics , political science , philosophy , biochemistry , chemistry , epistemology , law , gene
Abstract In the light of the initiative of the West African Monetary Zone (WAMZ) to introduce a common currency by 2020, this paper investigates the intricacies of the business cycles synchronicity among the six countries. Given: (i) the rising importance of trade and cooperation with China; (ii) the consideration of the Euro as a potential anchor currency and a vehicle for trade with the Eurozone; and (iii) the importance of Nigeria as the largest country of the group and the main supplier of oil, we investigate the relative importance of these three major players in having their business cycles linked with the group. In addition, we investigate the underlying determinants of the business cycles synchronicity among the WAMZ countries on a pairwise basis. Results show a clear dominance of China's business cycle synchronicity with the WAMZ over Europe's and Nigeria's. Trade integration emerges as the key underlying factor of the common cycle observed.