Economic Integration in WAEMU: Will the Multilateral Monitoring Mechanism lead to growth and welfare convergence?
- William Gbohoui
This paper analyzes the implications of the Convergence, Stability, Growth and Solidarity Pact adopted by West African Economic and Monetary Union (WAEMU) governments in nominal and welfare convergence of member states. Firstly, we implement a linear model with variable coefficients depending on times to take into account the dynamic of the nominal performances convergence. Afterward, we test standard convergence hypothesis between WAEMU countries. Then, using panel data, a gap approach model based on neoclassical growth theory enables us to test for the existence of multiple steady state equilibria in WAEMU. We find that out of the criteria of inflation and payment arrears, member states haven't showed any sustainable performances. Likewise, using multilateral surveillance system used in WAEMU hasn't stimulated the rates of beta convergence between member states. On contrary, sigma convergence denotes an upward tendency in the cross sectional dispersion of per capita income over time. Estimating convergence clubs refines these results and reveals that at least two clubs of convergence exist in WAEMU.