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Seigniorage and the Proposed East Africa Community (EAC) Monetary Union

Author

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  • Steven Buigut

    () (Andrew Young School of Policy Studies)

Abstract

A long-term objective of the East Africa Community treaty is to form a monetary union. This paper tests the viability of this proposal using a model of government finance that minimizes the social cost of financing government expenditure. The results indicate that the policies of these countries are consistent with inter-temporal tax smoothing, but the marginal social cost equalization hypothesis is rejected. Thus inflation tax does not have to differ across the countries for government financing reasons. This is therefore one less obstacle to monetary union.

Suggested Citation

  • Steven Buigut, 2004. "Seigniorage and the Proposed East Africa Community (EAC) Monetary Union," The African Finance Journal, Africagrowth Institute, vol. 6(2), pages 36-46.
  • Handle: RePEc:afj:journl:v:6:y:2004:i:2:p:36-46
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    File URL: http://www.journals.co.za/ej/ejour_finj.html
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    Cited by:

    1. Giscard Assoumou Ella, 2013. "The viability of an economic and monetary union in Africa with a unified currency: evidence from the African economies' reactions to the international income, price and monetary shocks," Working Papers hal-00851594, HAL.

    More about this item

    Keywords

    Social Cost Equalization; Seigniorage; Monetary Union; East Africa;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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