Towards monetary union in the Economic Community of West African States (ECOWAS): Better policy harmonisation and greater intra-trade are needed

Since the launch of the euro in 1999, the policy aspiration of the Economic Community of West African States (ECOWAS) for monetary union has increased despite its convergence challenge. This study investigates the economic characteristics of ECOWAS for a successful and sustainable monetary union. We use cluster analysis for the period 1998–2018. The findings show that there is considerable heterogeneity in the economic characteristics of ECOWAS countries. This suggests that the countries are not yet economically ready for a regional wide monetary union. The study also revealed key variables, including inflation, exchange rate volatility, intraregional trade, that clearly demarcate the two pre-existing monetary zones in the region. The study concludes that ECOWAS policymakers must enhance policy harmonisation and intra-regional trade.