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Currency Unions in Africa: Is the Trade Effect Substantial Enough to Justify their Formation?

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  • Paul R. Masson

Abstract

Using estimates that currency unions double trade, we quantify the welfare effects of forming currency unions for the African regional economic communities and for the African Union as a whole. The potential increase in trade is shown to be small, and much less than that resulting from the adoption of the euro. Allowing for increased African trade does not overturn the negative assessment of African currency unions, due to asymmetries in countries’ terms‐of‐trade shocks and their degree of fiscal discipline.

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  • Paul R. Masson, 2008. "Currency Unions in Africa: Is the Trade Effect Substantial Enough to Justify their Formation?," The World Economy, Wiley Blackwell, vol. 31(4), pages 533-547, April.
    • Handle: RePEc:bla:worlde:v:31:y:2008:i:4:p:533-547
    DOI: 10.1111/j.1467-9701.2007.01028.x
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    1. Mr. Michal Hulej & Mr. Charalambos G Tsangarides & Mr. Pierre Ewenczyk, 2006. "Stylized Facts on Bilateral Trade and Currency Unions: Implications for Africa," IMF Working Papers 2006/031, International Monetary Fund.
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    More about this item

    JEL classification:

    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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