West African Monetary Integration And Interstates Risk-Sharing
There are continuing efforts at the monetary integration and unionization in West Africa. Several academics argue that a monetary union among West African states would be costly because of the magnitude of asymmetric shocks. A common monetary policy is inappropriate and ineffective to respond to divergent shocks. Therefore, the stability of such a union is critically dependent on risk-sharing mechanisms for achieving income insurance and consumption smoothing. A monetary union is still optimal if output stabilization mechanisms such as risk-sharing institutions, are in place to cope with asymmetric shocks. This paper estimates risk-sharing channels among West African states from 1970 to 2004.