The implementation of the West African Monetary Zone will not affect Financial Stability in Ghana

What is it about?

Countries in monetary unions forfeit their ability to make monetary policy decisions. instead, monetary policy decisions like what interest rate should be are decided by the unionised monetary authority. if the countries monetary and business cycles are not aligned, it can result in overly relaxed or overly tight monetary stance for some countries. this can have implications for financial stability. we sought to determine the impact a monetary unification of the West African Monetary Zone (WAMZ) will have on the financial stability of Ghana, using a counterfactual framework

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Why is it important?

Economist generally agree that a currency union has efficiency advantages by facilitating capital and trade flows. It equally comes with certain flexibility and adjustment and financial stability cost requiring parties to currency union to maintain fiscal buffer as automatic adjusters, and inter-economy labour mobility as a balancing force among others. The West African Monetary Zone (WAMZ) has been in planning stage since 2000 that sceptics doubt if it will ever be implement. This study sheds light on how a monetary union can destabilise the financial sector through nonperforming loans and test if Ghana will suffer some financial instability if WAMZ was to be implemented