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Are Africa's Currency Unions Good for Trade?

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  • Charalambos Tsangarides
  • Pierre Ewenczyk
  • Michal Hulej
  • Mahvash Saeed Qureshi

Abstract

This paper explores and quantifies several aspects of the performance of Africa's currency unions. It benchmarks Africa's experience with that of the world using an augmented version of the gravity model and applying a comprehensive set of robustness checks. The empirical findings suggest that membership in a currency union should benefit Africa as much as it does the rest of the world. In addition, for both samples, we find evidence that (1) there is a significant currency union trade-generating effect; (2) currency unions are associated with trade creation and increased price comovements among member countries; and (3) the duration of currency union membership matters for trade: longer duration brings about greater benefits, and vice versa, however with some diminishing returns.

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal IMF Staff Papers.

Volume (Year): 56 (2009)
Issue (Month): 4 (November)
Pages: 876-918

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Handle: RePEc:pal:imfstp:v:56:y:2009:i:4:p:876-918

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References

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  1. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
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Citations

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Cited by:
  1. Christian Volpe Martincus & Jerónimo Carballo & Andrés Gallo, 2010. "The Impact of Export Promotion Institutions on Trade: Is It the Intensive or the Extensive Margin?," IDB Publications 36765, Inter-American Development Bank.
  2. Tomáš Havránek, 2010. "Rose effect and the euro: is the magic gone?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 146(2), pages 241-261, June.
  3. Tomáš Havránek, 2009. "Rose Effect and the Euro: The Magic is Gone," Working Papers IES 2009/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Aug 2009.
  4. Gilles Dufrénot & Valérie Mignon & Charalambos Tsangarides, 2009. "The Trade-Growth Nexus in the Developing Countries: a Quantile Regression Approach," Working Papers 2009-04, CEPII research center.
  5. Mahvash Saeed Qureshi, 2008. "Africa's Oil Abundance and External Competitiveness: Do Institutions Matter?," IMF Working Papers 08/172, International Monetary Fund.
  6. Xavier Debrun & Catherine A. Pattillo & Paul R. Masson, 2010. "Should African Monetary Unions Be Expanded? An Empirical Investigation of the Scope for Monetary Integration in Sub-Saharan Africa," IMF Working Papers 10/157, International Monetary Fund.
  7. Mahvash Saeed Qureshi & Charalambos G. Tsangarides, 2010. "The Empirics of Exchange Rate Regimes and Trade: Words vs. Deeds," IMF Working Papers 10/48, International Monetary Fund.

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