What is Fuzzy About Clustering in West Africa?
IMF Working Papers, March 1, 2006
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Bibliographic details
- Authors: Mahvash S Qureshi, Charalambos G Tsangarides
- Published: March 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451863505.001
Objective and methodology
- Applies techniques of clustering analysis to a set of variables suggested by the convergence criteria and the theory of optimal currency areas.
- Seeks country homogeneities to assess membership in the existing and proposed monetary unions of the broader west African region.
Key findings
- The analysis reveals considerable dissimilarities in the economic characteristics of the countries in west and central Africa.
- The West African Monetary Zone (WAMZ) countries do not form a cluster with the West Africa Economic and Monetary Union (WAEMU) countries.
- Within the WAMZ, there is a significant lack of homogeneity.
- When west and central African countries are considered together:
- Significant heterogeneities exist within the CFA franc zone.
- Some similarities are observed between the Economic and Monetary Community of Central Africa (CEMAC) and WAMZ countries.
- Overall finding: the results raise questions about the geographical boundaries of several existing and proposed monetary unions.
Implications and areas for further consideration
- Heterogeneities and cross-zone similarities identified by the clustering analysis imply potential challenges for currency union design and membership criteria.
- The observed lack of homogeneity within WAMZ suggests careful reassessment of convergence criteria and readiness for monetary integration.
- Heterogeneities within the CFA franc zone and similarities between CEMAC and WAMZ point to the need for further analysis of regional groupings and their economic coherence.