Analysis of Convergence Criteria in a Proposed Monetary Union: A Study of the Economic Community of West African States

Year 2015, Volume: 5 Issue: 1, 230 - 239, 01.03.2015

Jimoh Olakunle Saka Ibiyemi Ajoke Onafowokan Adekunle Ademayowa Adebayo

Abstract

This study examines the processes of the monetary union of the Economic Community of West African States (ECOWAS). It takes a critical look at the convergence criteria and the various conditions under which they are to be met. Using the panel least square technique an estimate of the beta convergence was made for the period 2000-2008. The findings show that nearly all the explanatory variables have indirect effects on the income growth rate and that there tends to be convergence in income over time. The speed of adjustment estimated is 0.2% per year and the half-life is -346.92. Thus the economies can make up for half of the distance that separates them from their stationary state. From the findings, it was concluded that a well integrated economy could further the achievement of steady growth in these countries in the long run.

Keywords

Monetary Union, Convergence Criteria, ECOWAS