Monetary Union in West Africa (Ecowas): Is It Desirable and How Could It Be Achieved? (Occasional Paper (International Monetary Fund))

Following an explanation of the details of the Economic Community of West African States (ECOWAS) initiative, Monetary Union in West Africa (ECOWAS) evaluates whether a monetary union makes economic sense, discusses the institutional requirements for a successful monetary union, and considers how best the political momentum for a union can be channeled toward a fundamental improvement in underlying policies. The authors urge the ECOWAS countries to invest their energies in the project’s crucial first phase of enhancing mutual surveillance and improving macroeconomic and structural policies—instead of trying to meet the very short deadline of 2004 for an ECOWAS-wide monetary union. Success in this endeavor would in and of itself help to increase exchange rate stability and a looser form of monetary cooperation would be less costly, could be achieved sooner, and would allow some flexibility in response to the asymmetric shocks to which these economies are susceptible. The paper concludes that full ECOWAS monetary union should await more extensive economic convergence and reinforced political solidarity within the region.