Journal of Business and Economic Development

| Peer-Reviewed |

External Economic Shocks and Vulnerability of the West African Economic and Monetary Union

Received: 15 June 2020    Accepted: 07 July 2020    Published: 23 July 2020
Views:       Downloads:

Share This Article

Abstract

Background: The regional integration, may it be economic integration or monetary union, is considered, since the success of the European Union, as a mean to development and to mitigate the consequences of exposure to globalization. However, in the African context, the capacity of resilience and the vulnerability of these economies against external shocks remain questionable. Objective: This paper aims to analyze the effects of external economic shocks on the economies of West African Economic and Monetary Union (WAEMU) which is comprised of West African francophone countries (Benin, Cote d’Ivoire, Mali, Niger, Senegal and Togo) and lusophone countries (Bissau Guinea). Method: To achieve this, the Vector Auto Regression technique has been used. We examine the impact of Organization for Economic Cooperation and Development (OECD)’s GDP the price of agricultural commodities, the price of the crude oil barrel, and aid and development assistance shocks on the economies of the union. Due to the lack of data, Bissau Guinea has been removal from the analysis. The data ar primarily sourced from the World Development Indicators and World Economic Outlook databases respectively from the World Bank and the International Monetary Fund and cover the period 1980 – 2018. Results: The results show that the WAEMU countries are highly sensitive to the variations of these different variables with the exception of the price of the crude oil barrel. In addition, the impulse responses show that the WAEMU’s economies are permanently affected by these shocks. Conclusion: In terms of economic policy implications, it is essential to strengthen the insurance mechanisms such as intra-trade through the deepening of the regional integration process, responsible budgetary policy, flexibility of the economies, and the economic convergence for the viability of the union.

DOI 10.11648/j.jbed.20200503.13
Published in Journal of Business and Economic Development (Volume 5, Issue 3, September 2020)
Page(s) 130-137
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Economic Shock, WAEMU, Economic Integration, VAR

References
[1] Mundell, R. A. (1961). A theory of optimum currency areas’, Am. Econ. Rev., vol. 51, no. 4, pp. 657–665.
[2] McKinnon, R. I. (1963). ‘Optimum currency areas’, Am. Econ. Rev., vol. 53, no. 4, pp. 717–725.
[3] Kenen, P. (1969). The theory of optimum currency areas: an eclectic view. In (Mundell R. and A. Swoboda eds.)“Monetary Problems in the International Economy”. Chicago: University of Chicago Press.
[4] Bayoumi, T. and Eichengreen, B. (1994). ‘Monetary and exchange rate arrangements for NAFTA’, J. Dev. Econ., vol. 43, no. 1, pp. 125–165, 1994.
[5] Eichengreen, B. (1997). European monetary unification: theory, practice, and analysis. Mit Press.
[6] Cøeuré, B. (2012). ‘Les mécanismes d’assurance au sein de l’Union économique et monétaire: avant, pendant et après la crise’, Rev. Déconomie Financ, no. 4, pp. 231–242.
[7] Assoumou-Ella, G. (2012). ‘Responses of African economies to the international economic shocks: an empirical study’, Eur. Econ. Lett., vol. 1, no. 1, pp. 46–51.
[8] Tapsoba, J. A. (2011). ‘Union Monétaire en Afrique de l’Ouest: Quelles Réponses à l’Hétérogénéité des Chocs?’.
[9] Fielding, D and Shields, K (2001). ‘Modelling macroeconomic shocks in the CFA Franc Zone’, J. Dev. Econ, vol. 66, no. 1, pp. 199–223.
[10] Bénassy-Quéré, A and Coupet, M (2005). ‘On the adequacy of monetary arrangements in Sub-Saharan Africa’, World Econ., vol. 28, no. 3, pp. 349–373.
[11] Qureshi, M. S and M. Tsangarides, M. C. G (2006). What is fuzzy about clustering in West Africa? International Monetary Fund.
[12] Debrun, X, Masson, P and Pattillo, C (2005). ‘Monetary union in West Africa: who might gain, who might lose, and why?’, Can. J. Econ. Can. Déconomique, vol. 38, no. 2, pp. 454–481.
[13] Houssa, R. (2008). ‘Monetary union in West Africa and asymmetric shocks: A dynamic structural factor model approach’, J. Dev. Econ., vol. 85, no. 1–2, pp. 319–347.
[14] Sarr, F. and Ndiaye, C. T. (2011). ‘Asymétrie et convergence des politiques et chocs budgétaires en zone UEMOA’, Rev. Économique Monét. N, vol. 8.
[15] Guillaumont, S (2004). ‘Bilan de l’intégration monétaire dans l’UMOA’, CERDI.
[16] Madeley, J. (2003). ‘Transnational corporations and developing countries: big business, poor peoples’, ACP-EU Cour., vol. 196, pp. 36–38.
[17] Berman, N. and Martin, P. (2012). ‘The vulnerability of sub-Saharan Africa to financial crises: the case of trade’, IMF Econ. Rev., vol. 60, no. 3, pp. 329–364.
[18] Assoumou-Ella, G. (2014). ‘International Crises, Characterization of Contagion and Social Well-Being in Developing Countries: A Theoretical Model’.
[19] Naudé, W. A. and Saayman, A. (2005). ‘Determinants of tourist arrivals in Africa: a panel data regression analysis’, Tour. Econ., vol. 11, no. 3, pp. 365–391.
[20] Kose, M. A. and Riezman, R. (2013). ‘Trade shocks and macroeconomic fluctuations in Africa’, in International Trade Agreements and Political Economy, World Scientific, pp. 369–394.
[21] Nkomo, J. C. (2006). ‘The impact of higher oil prices on Southern African countries’, J. Energy South. Afr., vol. 17, no. 1, pp. 10–17.
[22] Houngbédji, S. H. (2007). ‘Analyse de l’optimalité de la zone monétaire UEMOA dans un contexte d’intégration’, Maitrise En Sci. Econ. Univ. Parakou Bénin.
[23] Agbahoungba, S. (2012). ‘Analyse de l’optimalité de la ZMAO (Zone monétaire de l’Afrique de l’Ouest) dans un contexte d’intégration’, Maitrise En Sci. Econ. Univ. Parakou Bénin.
[24] Tapsoba, J. A. (2009). ‘Intégration monétaire africaine et changements structurels: commerce, partage des risques et coordination budgétaire’, PhD Thesis, Université d’Auvergne-Clermont-Ferrand I.
[25] Coulibaly, I. and Gnimassoun, B. (2013). ‘Optimality of a monetary union: New evidence from exchange rate misalignments in West Africa’, Econ. Model., vol. 32, pp. 463–482, 2013.
[26] Njoroge, L. K, Opolot, J, Abuka, C and Apaa-Okello, J. (2011). ‘Nature and Extent of Shocks in COMESA: Implications for a Monetary Union’, Interdiscip. J. Res. Bus., vol. 1, no. 3, pp. 23–46.
[27] Gossé J. B. and Guillaumin, C. (2010). ‘L’impact des chocs externes sur et à l’intérieur de la zone euro: les enseignements d’un modèle vectoriel autorégressif structurel’, Econ. Previs., no. 4, pp. 15–33.
[28] Allegret, J. P. and Sand-Zantman, A. (2010). ‘Processus d’intégration et coordination des politiques macroéconomiques dans le MERCOSUR: une approche en termes de cycles’, Actual. Économique, vol. 86, no. 2, pp. 163–204.
[29] Abdoulaye, D. (2017) ‘Droits de Propriété, corruption et croissance économique dans les Pays de l’UEMOA : Une analyse de la causalité au sens de Granger’, Afr. Integr. Dev. Rev., vol. 10, pp. 87–106, 2017.
[30] Adedodja, E. A. and Sirpe, G. (2019). ‘Corruption et pauvreté dans les pays de l’UEMOA’, Ethique et économique/Ethics and Economics, vol. 2, no. 16, p. 14.
[31] Fielding, D. and Shields, K. (2001). “Modelling macroeconomic shocks in the CFA Franc Zone » Journal of Economic Development, Vol. 66, Issue 1, October 2001, Pages 199-223.
Author Information
  • Economic and Management Department (UFR SES), University of Thies, Thies, Senegal

  • Economic and Management Department (LAREG), University of Parakou, Parakou, Benin

Cite This Article
  • APA Style

    Ibrahima Thiam, Sam Agbahoungba. (2020). External Economic Shocks and Vulnerability of the West African Economic and Monetary Union. Journal of Business and Economic Development, 5(3), 130-137. https://doi.org/10.11648/j.jbed.20200503.13

    Copy | Download

    ACS Style

    Ibrahima Thiam; Sam Agbahoungba. External Economic Shocks and Vulnerability of the West African Economic and Monetary Union. J. Bus. Econ. Dev. 2020, 5(3), 130-137. doi: 10.11648/j.jbed.20200503.13

    Copy | Download

    AMA Style

    Ibrahima Thiam, Sam Agbahoungba. External Economic Shocks and Vulnerability of the West African Economic and Monetary Union. J Bus Econ Dev. 2020;5(3):130-137. doi: 10.11648/j.jbed.20200503.13

    Copy | Download

  • @article{10.11648/j.jbed.20200503.13,
      author = {Ibrahima Thiam and Sam Agbahoungba},
      title = {External Economic Shocks and Vulnerability of the West African Economic and Monetary Union},
      journal = {Journal of Business and Economic Development},
      volume = {5},
      number = {3},
      pages = {130-137},
      doi = {10.11648/j.jbed.20200503.13},
      url = {https://doi.org/10.11648/j.jbed.20200503.13},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.jbed.20200503.13},
      abstract = {Background: The regional integration, may it be economic integration or monetary union, is considered, since the success of the European Union, as a mean to development and to mitigate the consequences of exposure to globalization. However, in the African context, the capacity of resilience and the vulnerability of these economies against external shocks remain questionable. Objective: This paper aims to analyze the effects of external economic shocks on the economies of West African Economic and Monetary Union (WAEMU) which is comprised of West African francophone countries (Benin, Cote d’Ivoire, Mali, Niger, Senegal and Togo) and lusophone countries (Bissau Guinea). Method: To achieve this, the Vector Auto Regression technique has been used. We examine the impact of Organization for Economic Cooperation and Development (OECD)’s GDP the price of agricultural commodities, the price of the crude oil barrel, and aid and development assistance shocks on the economies of the union. Due to the lack of data, Bissau Guinea has been removal from the analysis. The data ar primarily sourced from the World Development Indicators and World Economic Outlook databases respectively from the World Bank and the International Monetary Fund and cover the period 1980 – 2018. Results: The results show that the WAEMU countries are highly sensitive to the variations of these different variables with the exception of the price of the crude oil barrel. In addition, the impulse responses show that the WAEMU’s economies are permanently affected by these shocks. Conclusion: In terms of economic policy implications, it is essential to strengthen the insurance mechanisms such as intra-trade through the deepening of the regional integration process, responsible budgetary policy, flexibility of the economies, and the economic convergence for the viability of the union.},
     year = {2020}
    }
    

    Copy | Download

  • TY  - JOUR
    T1  - External Economic Shocks and Vulnerability of the West African Economic and Monetary Union
    AU  - Ibrahima Thiam
    AU  - Sam Agbahoungba
    Y1  - 2020/07/23
    PY  - 2020
    N1  - https://doi.org/10.11648/j.jbed.20200503.13
    DO  - 10.11648/j.jbed.20200503.13
    T2  - Journal of Business and Economic Development
    JF  - Journal of Business and Economic Development
    JO  - Journal of Business and Economic Development
    SP  - 130
    EP  - 137
    PB  - Science Publishing Group
    SN  - 2637-3874
    UR  - https://doi.org/10.11648/j.jbed.20200503.13
    AB  - Background: The regional integration, may it be economic integration or monetary union, is considered, since the success of the European Union, as a mean to development and to mitigate the consequences of exposure to globalization. However, in the African context, the capacity of resilience and the vulnerability of these economies against external shocks remain questionable. Objective: This paper aims to analyze the effects of external economic shocks on the economies of West African Economic and Monetary Union (WAEMU) which is comprised of West African francophone countries (Benin, Cote d’Ivoire, Mali, Niger, Senegal and Togo) and lusophone countries (Bissau Guinea). Method: To achieve this, the Vector Auto Regression technique has been used. We examine the impact of Organization for Economic Cooperation and Development (OECD)’s GDP the price of agricultural commodities, the price of the crude oil barrel, and aid and development assistance shocks on the economies of the union. Due to the lack of data, Bissau Guinea has been removal from the analysis. The data ar primarily sourced from the World Development Indicators and World Economic Outlook databases respectively from the World Bank and the International Monetary Fund and cover the period 1980 – 2018. Results: The results show that the WAEMU countries are highly sensitive to the variations of these different variables with the exception of the price of the crude oil barrel. In addition, the impulse responses show that the WAEMU’s economies are permanently affected by these shocks. Conclusion: In terms of economic policy implications, it is essential to strengthen the insurance mechanisms such as intra-trade through the deepening of the regional integration process, responsible budgetary policy, flexibility of the economies, and the economic convergence for the viability of the union.
    VL  - 5
    IS  - 3
    ER  - 

    Copy | Download

  • Sections