Abstract

For a proposed monetary union, a study of the uniformity of macroeconomic policies and performances, the level of economic development of the prospective monetary union’s member economies as well as the patterns of economic dynamics would give evidence to suggest potential problems and possible costs (or otherwise) of single monetary and exchange rate policy. As a theoretical property of an optimum currency area (OCA), the more the degree of uniformity or homogeneity of the economic performances of a monetary union’s member countries, the easier the stability of the single currency of the union whenever the union is faced with economic shock. This paper, therefore investigated the uniformity of some relevant macroeconomic indicators as well as the homogeneity of the economic performances of the West African Monetary Zone (WAMZ) countries (consisting of The Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone) and assessed the macroeconomic dynamics (based on empirical analyses of growth differences) within the proposed monetary enclave in the evaluation of the feasibility of monetary integration of the West African sub-continent. Relevant data employed in this study span between 1980 and 2014. ANOVA tests was employed to determine if the economic variables being assessed are similar among the monetary union members. Twenty two variable/ratios were evaluated in the ANOVA tests. Fiscal harmony, including homogeneities in balance of payment accounts and external trade within the WAMZ were specifically investigated. Further attempt made here was the estimation of economic dynamics across the WAMZ by shrinking these dynamics into a single indicator of Theil Coefficient of Inequality which compares the differences in growth in each member country as well as growth in the entire WAMZ economies; the WAMZ economies (without the lead economy, Nigeria); and the lead economy of Nigeria. Various assessments and evaluations in this paper produced evidences that suggest that virtually all these macroeconomic and financial indicators examined do not have similar features across the WAMZ. In terms the whole WAMZ, Ghana has same feature in a WAMZ aggregate economy, when Nigeria was excluded from the analyses. Nigeria stands the only country that enormously share similarities with the entire WAMZ when the six WAMZ economies were aggregated.