|Title||Firm-level responses to monetary union and exchange rate regime: evidence from Cote D’Ivoire and Ghana|
This study investigated the impact of the exchange rate regime as well as monetary union on businesses in West African countries based on two cases: Cote d’Ivoire and Ghana.
Explicitly, the main hypothesis covers Ivorian and Ghanaian firms’ responses to monetary union and exchange rate regime.
Two sets of questionnaires needed one in French for Ivorian firms and the other one in English for companies in Ghana.
250 questionnaires had been sent across both countries, Cote d’Ivoire and Ghana. 57 Ivorian companies responded while only 43 Ghanaian were available to fill the questionnaire in. This represents a total response rate of 40 percent, which is appropriate, efficient and adequate for this research study.
Mostly, the empirical results based on the primary information and supported with secondary data, strongly confirmed all of the research hypotheses.
The study found that being member of the CFA zone with a pegged currency to the Euro has helped expand Cote d’Ivoire’s trade with the European Union in comparison with Ghana.
The trade statistics in chapter 5 sections 5.3 of the thesis shows evidence of high trade flows from Cote d’Ivoire to the European Union as well as the Rest of the World. That trade expansion has helped Cote d’Ivoire’s growth despite its instability due to the military and political upraising. Exports played a vital role in the development of African countries, especially in Cote d’Ivoire. During the period 1973-2005, exports represent on average 39.9 percent of the Ivorian GDP and imports of goods and services 35.9 percent. While Ghana’s exports represent only 20 percent of its GDP and its imports of goods and services 27.2 percent for the same period.
Again, the questionnaire-survey shows that overwhelmingly, all firms in both Cote d’Ivoire and Ghana agreed on issues related to the benefit of a monetary union and trade with the European Union with a strong passion on the benefit of operating in a fixed exchange rate regime. Therefore, they all supported the hypothesis that membership of a monetary union is beneficial to member states.
At the microeconomic level, a monetary union has to be a strong combination of competitiveness and solidarity by taking into account modernisation of social policies. Also, it has to be based on growth or output, higher employment and higher productivity.
Finally, a monetary union brings small and medium size enterprises more choices and business opportunities, which will be stronger and more competitive. Large corporations enjoy the eradication of cross-border operations and competition.
Again, wealth is created at the microeconomic level through the ability for firms to produce valuable goods and services using efficient methods.