International Risk-sharing in the Economic Community of West African States (ECOWAS)
Stephane Zouri  1@  
1 : Sciences Economiques
Université Paris 1 Pantheón-Sorbonne, Economics Department, Paris School of Economics - CNRS

This paper provides arguments for a monetary union in ECOWAS. To do this, it identifies risk-sharing mechanisms that work in the region. Indeed, in a monetary union, heterogeneous shocks are not problematic if risk-sharing mechanisms, other than exchange rate, are in place to allow countries to adjust to specific shocks. In addition, the paper shows that beyond risk-sharing mechanisms, there are potential gains in social well-being related to risk-sharing. The results show that savings, remittance inflows and foreign aid are channels that absorb asymmetric shocks in ECOWAS. Moreover, they show that financial development contributes to increasing the degree of risk-sharing among member countries. Finally, the results show that the potential gains related to risk-sharing are even more important for small economies. This analysis shows that some countries such as Guinea-Bissau, Cape Verde and The Gambia can play a stabilizing role in the region. Thus monetary union in ECOWAS can be optimal through the development of regional credit markets, by the establishment of an operational financial market in the region, by the creation of an Economic Government of the zone and by advocating a political and economic stability.


Personnes connectées : 1