Real convergence in West African Economic and Monetary Union (WAEMU)

- We analysed the real convergence by taking into account the multiple structural shocks.
- We showed stochastic convergence with the panel stationary test with multiple breaks.
- Burkina Faso and Mali are engaged in a catching-up process.
- Togo (unfortunately) is engaged in a convergence process towards the union average.
- Niger (unfortunately) and Senegal (fortunately) are diverging from the union average.

The purpose of this study is to address the gap in research on real convergence in the WAEMU. We have referred to the methodology of Carlino and Mills (1993), which combines the analysis of stochastic and β-convergence. Perron (1989) has shown that neglecting structural breaks in unit root tests can lead to erroneous conclusions; therefore, we have used the Carrion-i-Silvestre et al. (2005) panel stationarity test to address this problem. By using the Bai and Perron (1998) procedure to identify the structural breaks endogenously, we have been able to show that the WAEMU countries have actually been subjected to several heterogeneous shocks. When these shocks were taken into account in the unit root tests, a stochastic convergence emerged for five countries in the WAEMU. Moreover, additional analysis in terms of β-convergence showed that Burkina Faso and Mali are engaged in a catching-up process; Togo is converging toward the community average whereas Niger and Senegal are diverging from it.