Economic Integration in WAEMU: Nominal Convergence and Growth Dynamics

Abstract

Economic globalization and the emergence of major regional economic blocs place Africa in a challenging situation. As the physical borders of nation states become less relevant, the formation of regional entities is an essential way to respond to the legitimate aspirations of people. Aware that development requires pooling resources for effective industrialization and expanded markets, West African countries have previously engaged in integration through the West African Economic Community (WAEC) and the Economic Community of West African States (ECOWAS). By creating in 1994 the West African Economic and Monetary Union (WAEMU), member states have again shown interest in coming together to better integrate into the global economy. The WAEMU provides for a multilateral surveillance mechanism aimed at ensuring the “convergence” of member economies. Convergence, the gradual reduction of disparities in economic indicators between countries, can generally be achieved through two distinct but not exclusive patterns: nominal convergence, which focuses on the evolution of nominal variables (costs and prices); and real convergence, which requires the approximation of living standards. Like the European Union, WAEMU countries have opted for the convergence of nominal variables, assuming that nominal convergence will lead to real convergence.