Policy Rule-based Stress Tests of Monetary Integration and Single Monetary Policy in the West African Monetary Zone

This paper carried out monetary policy rule based stress test to examine the ease of monetary integration of the West Africa Monetary Zone as well as the adequacy of single monetary policy for national stability of the six WAMZ member countries. Two monetary policy rules (the McCallum monetary base growth rule and the Taylor nominal interest rate rule) were employed in this study with appropriate data spanning over the 25-year period between 1990 and 2014. Findings produce evidence to suggest that Nigeria is strongly likely to be the crucial major determinant of the single monetary policy stance within the future currency union. However, these two monetary policy rules principally generated varied results. One common finding from this monetary policy rules stress tests suggests that Nigeria is solely guaranteed to find the monetary integration easy as well the single monetary policy adequate for its national stability.