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The Common Monetary Area in Southern Africa

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  • Iyabo Masha
  • Leighton Harris
  • Jian-Ye Wang
  • Kazuko Shirono
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    Abstract

    This study assesses the experience of the Common Monetary Area (CMA) based on available empirical evidence over the last two decades. It pays particular attention to member countries'' adjustment to economic shocks in recent years and the inter-country linkages, including the spillover effects of policies. The paper draws the main lessons from the CMA experience, identifies key policy challenges, and discusses the issues facing the member countries in their efforts to achieve sustained growth. Implications for further economic integration in a broader regional context are also noted.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/158.

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    Length: 63
    Date of creation: 01 Jul 2007
    Date of revision:
    Handle: RePEc:imf:imfwpa:07/158

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    Related research

    Keywords: Adjustment process; Financial sector; monetary union; inflation; central bank; monetary unions; monetary fund; monetary area; monetary policy; per capita income; terms of trade; asymmetric shocks; short-term debt; external shocks; monetary integration; member country; exchange rate policies; official reserves; monetary arrangements; free trade; external trade; regional trade; bilateral agreements; exchange rate regime; national bank; rand monetary area; local currencies; commodity prices; neighboring countries; regional integration; export processing; money demand; regulatory regime; border trade; monetary policies; world prices; unskilled workers; balance of payments; free trade area; unskilled labor; economic integration; world trade organization; monetary base; discount rate; optimum currency areas; international trade; value-added tax; monetary financing; world market; trade flows; market integration; trade area; world trade; price stability; monetary authority; skilled workers; skilled labor; money supply; foreign trade; tradable goods; domestic investment; trade volume; monetary policy framework; trade pattern; bank discount rates; trade liberalization; trade changes; bilateral agreement; current account balance; increasing trade; liberalizing trade; domestic prices; dispute settlement; export processing zones; export incentives; domestic savings; monetary anchor; monetary arrangement; alternative monetary anchor; import tariffs; monetary systems; trade taxes; trade preferences; export performance; trade barriers; discount rates; import price; free trade agreements; reserve ratios; trade policy review; money markets; trade relations; monetary agreement; monetary aggregates; money market; poverty alleviation; monetary stability; prudential requirements; multilateral agreement; investment protection; monetary framework; tariff rates; monetary growth; dispute settlement mechanism; imported intermediate; competition policy; import duty; tariff schedule; trading partners; domestic money supply; free entry; independent monetary policy; trade agreements; world demand; exchange rate policy; external tariff; perfect substitutes; world economy; reserve positions; trade capacity; rural population; evidence of convergence;

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    References

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    1. X. P. Guma*, 1985. "The Rand Monetary Area Agreement," South African Journal of Economics, Economic Society of South Africa, vol. 53(2), pages 109-120, 06.
    2. Owen F. Humpage & Jean M. McIntire, 1995. "An introduction to currency boards," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-11.
    3. Anthony Annett, 2006. "Enforcement and the Stability and Growth Pact," IMF Working Papers 06/116, International Monetary Fund.
    4. Guillaumont, Patrick & Guillaumont, Sylviane & Plane, Patrick, 1988. "Participating in African monetary unions: An alternative evaluation," World Development, Elsevier, vol. 16(5), pages 569-576, May.
    5. Martin Grandes, 2003. "Macroeconomic Convergence in Southern Africa: The Rand Zone Experience," OECD Development Centre Working Papers 231, OECD Publishing.
    6. Sachs, Jeffrey & Sala-i-Martin, Xavier, 1992. "Fiscal Federalism and Optimum Currency Areas: Evidence for Europe from the United States," CEPR Discussion Papers 632, C.E.P.R. Discussion Papers.
    7. Cobham, David & Robson, Peter, 1994. "Monetary integration in Africa: A deliberately European perspective," World Development, Elsevier, vol. 22(3), pages 285-299, March.
    8. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
    9. Ronald Macdonald & Luca Antonio Ricci, 2004. "Estimation Of The Equilibrium Real Exchange Rate For South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 72(2), pages 282-304, 06.
    10. Meshack Tjirongo, 1995. "Short-term stabilization versus long-term price stability: evaluating Namibia's membership of the Common Monetary Area," CSAE Working Paper Series 1995-18, Centre for the Study of African Economies, University of Oxford.
    11. Devarajan, Shantayanan & de Melo, Jaime, 1987. "Evaluating participation in African monetary unions: A statistical analysis of the CFA Zones," World Development, Elsevier, vol. 15(4), pages 483-496, April.
    12. Honohan, Patrick, 1992. "Price and monetary convergence in currency unions: The franc and rand zones," Journal of International Money and Finance, Elsevier, vol. 11(4), pages 397-410, August.
    13. World Bank, 2004. "Lesotho : Financial Sector Review," World Bank Other Operational Studies 14537, The World Bank.
    14. Catherine A. Pattillo & Paul R. Masson, 2001. "Monetary Union in West Africa (ECOWAS)," IMF Occasional Papers 204, International Monetary Fund.
    15. Hannah Nielsen & Ebson Uanguta & Sylvanus Ikhide, 2005. "Financial Integration In The Common Monetary Area," South African Journal of Economics, Economic Society of South Africa, vol. 73(4), pages 710-721, December.
    16. Christian B. Mulder & Matthieu Bussière, 1999. "External Vulnerability in Emerging Market Economies," IMF Working Papers 99/88, International Monetary Fund.
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    Cited by:
    1. Jian-Ye Wang & Nisreen H. Farhan & Amar Shanghavi & Márcio Valério Ronci & Misa Takebe, 2008. "The Choice of Monetary and Exchange Rate Arrangements for a Small, Open, Low-Income Economy," IMF Working Papers 08/118, International Monetary Fund.
    2. Frey, Leo & Volz, Ulrich, 2011. "Regional Financial Integration in Sub-Saharan Africa - An Empirical Examination of its Effects on Financial Market Development," Proceedings of the German Development Economics Conference, Berlin 2011 29, Verein für Socialpolitik, Research Committee Development Economics.

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