Collective Pegging to a Single Currency: The West African Monetary Union

Abstract

Using a four-country, two-tier macroeconomic model, it is shown that the pseudo-exchange rate union with the large partner has no effect on the real exchange rates of the small countries but affect their price levels, whereas a full monetary union requires in principle a transfer whose allocation between the two small countries by their common central bank may have real effects. This transfer is precisely provided by the large country, as guarantor of the fixed exchange rate arrangement. When both small countries are in surplus, there is a reverse transfer to the large country, with no monetary consequences. In line with the findings of the model, evidence is provided on monetary allocations in UMOA and on the real exchange rates of its major members, as compared to other African countries.

Cape Verde and Mozambique as Development Successes in West and Southern Africa

“…Once again the Luiz, Pereira, and Oliveira (2013) index for Mozambique avoids some of these pitfalls by distinguishing carefully between the rules of the game and their outcomes. Macedo (2001) reports that trade openness reduces perceived corruption, even after correcting for its endogeneity, and claims that this is the way in which globalization improves governance, given highly significant historical control variables (e.g., Protestant tradition, de facto democracy, and OECD membership). Eichengreen and Leblang (2006) find a two-way interaction between democracy and globalization over the entire 1870-2000 period, distinguishing trade from financial openness but measuring democracy as a dichotomous variable.…”

“…Taking a global view should foster governance innovation, as dominant players have different strengths (Nye 2002). Yet free-rider problems prevent cooperation among abstract regions, especially those where there are no peer-review mechanisms, let alone a culture of cross-cutting intergovernmental cooperation, as seemed to be the case in the rest of the world's significant actors and even in China, certainly before the creation of the Group of 20 (Macedo 2011). In addition, around seventy "fragile states," most of which are located in Africa, are very specific in their fragility (Bourguignon et al 2008).…”

“…Macedo (2010) describes the implications of the crisis for international governance innovation and analyzes the peer-review mechanism of the IMF for the G20 drawing on Niels Thygesen's label on peer pressure by proxy at IMF and by commitment at EU. See also Macedo (2008). Five were examined from July 2002, four in 2008, and AEO (2009 expected six, but only three (including Mozambique) were carried out in 2009 (AEO 2010, 72) plus Mauritius in the 13th Forum in Kampala in late July.…”

“…Aside from five African countries (Angola, Cape Verde, Guinea-Bissau, Mozambique, and São Tomé e Príncipe), Brazil and Portugal are founding members, Timor Leste joined in 2001 and Equatorial Guinea in 2014, while Georgia, Japan, Mauritius, Senegal, and Turkey are associate members of CPLP (Macedo 2015). Macedo (2008) draws on a 2003 report for the OECD secretary general, using labels suggested by Niels Thygesen at an OECD Development Center seminar, such as peer pressure by proxy at IMF and by commitment at EU. Other useful references to work carried out along with the AEO report (produced since 2001) are in OECD (2003) and IICT (2007), the first comparative report on the 2006 Bissau declaration.…”

Comparing Exchange Market Pressure in West and Southern African Countries

“…The numeraire is taken to be the euro for ECOWAS -where a number of currencies have adopted the Franc CFA as described in Macedo (1986) -and the dollar for SADC. This paper uses as motivation and draws on the methodology used by for the five Portuguese speaking countries (PALOP).…”