An evaluation of the viability of a single monetary zone in ECOWAS

Currency convertibility and monetary integration activities of the Economic Community of West African States (ECOWAS) are directed at addressing the problems of multiple currencies and exchange rate changes that are perceived as stumbling blocks to regional integration. A real exchange rate (RER) variability model shows that ECOWAS is closer to a monetary union now than before. As expected, the implementation of structural adjustment programmes (SAPs) by various governments in the subregion has brought about a reasonable level of convergence. However, wide differences still exist between RER shocks facing CFA zone and non-CFA zone West African countries. Further convergence in economic policy and alternatives to dependence on revenues from taxes on international transactions are required for a stable region-wide monetary union in West Africa.