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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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Citations

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Cited by:
  1. Gilles Dufrenot & Valerie Mignon & Charalambos Tsangarides, 2010. "The trade-growth nexus in the developing countries: a quantile regression approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 146(4), pages 731-761, December.
  2. Qureshi, Mahvash Saeed & Tsangarides, Charalambos G., 2012. "Hard or Soft Pegs? Choice of Exchange Rate Regime and Trade in Africa," World Development, Elsevier, Elsevier, vol. 40(4), pages 667-680.
  3. Mahvash Saeed Qureshi, 2008. "Africa's Oil Abundance and External Competitiveness," IMF Working Papers, International Monetary Fund 08/172, International Monetary Fund.
  4. Havranek, Tomas, 2009. "Rose Effect and the Euro: Is the Magic Gone?," MPRA Paper 18479, University Library of Munich, Germany, revised 07 Nov 2009.
  5. 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.
  6. Cécile Couharde & Issiaka Coulibaly & David Guerreiro & Valérie Mignon, 2012. "Revisiting the theory of optimum currency areas: Is the CFA franc zone sustainable?," EconomiX Working Papers 2012-34, University of Paris West - Nanterre la Défense, EconomiX.
  7. 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, International Monetary Fund 10/157, International Monetary Fund.
  8. Mahvash Saeed Qureshi & Charalambos G. Tsangarides, 2010. "The Empirics of Exchange Rate Regimes and Trade," IMF Working Papers, International Monetary Fund 10/48, International Monetary Fund.
  9. Mahvash Saeed Qureshi, 2009. "Trade and Thy Neighbor's War," IMF Working Papers, International Monetary Fund 09/283, International Monetary Fund.
  10. Tomáš Havránek, 2009. "Rose Effect and the Euro: The Magic is Gone," Working Papers IES, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies 2009/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Aug 2009.

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