Optimum Currency Area and Shock Asymmetry: A Dynamic Analysis of the West African Monetary Zone (WAMZ)

Abstract

This study accesses the feasibility of forming an Optimum Currency Area (OCA) in the West African Monetary Zone (WAMZ) from the symmetry of economic shocks which affect member economies. It applies a simple bivariate variant of the vector autoregressive (VAR) model. The results relatively suggest the feasibility of the WAMZ forming an OCA. The likelihood of incoming shocks problems seem to exists from the results. It is advisable that future research apply the more informative minimum distance estimation (MDE) technique.optimum currency area, shocks, asymmetry, West African Monetary Zone, vector autoregressive.