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Benefits from Mutual Restraint in a Multilateral Monetary Union

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  • Buigut, Steven
  • Valev, Neven T.

Abstract

Summary We show that monetary union can enhance price stability for its member countries even if none of them has a long history of stable prices and independent monetary policy, as is the case in a number of monetary union initiatives among developing countries. The positive effect obtains because the opportunistic objectives of one country's policy makers are kept in check at the union level by other members with disparate objectives. We calibrate the model to evaluate the proposed monetary union in the East African Community. The empirical results show that the mutual restraint on monetary policy is an important determinant of the expected benefit from an EAC monetary union.

Suggested Citation

  • Buigut, Steven & Valev, Neven T., 2009. "Benefits from Mutual Restraint in a Multilateral Monetary Union," World Development, Elsevier, vol. 37(3), pages 585-594, March.
  • Handle: RePEc:eee:wdevel:v:37:y:2009:i:3:p:585-594
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    Cited by:

    1. Ester G. Silva & Aurora A. C. Teixeira, 2011. "Does structure influence growth? A panel data econometric assessment of "relatively less developed" countries, 1979--2003," Industrial and Corporate Change, Oxford University Press, pages 457-510.
    2. Joao Loureiro & Manuel m.f. Martins & Ana paula Ribeiro, 2010. "Cape Verde: The Case For Euroisation," South African Journal of Economics, Economic Society of South Africa, vol. 78(3), pages 248-268, September.
    3. Simplice A, Asongu, 2012. "Democracy and Stock Market Performance in African Countries," MPRA Paper 38168, University Library of Munich, Germany.
    4. Simplice Asongu & Jacinta C. Nwachukwu & Vanessa S. Tchamyou, 2017. "A summary of a survey on proposed African monetary unions," Working Papers 17/008, African Governance and Development Institute..
    5. repec:bla:jecsur:v:31:y:2017:i:3:p:878-902 is not listed on IDEAS
    6. Simplice Asongu & Jacinta Nwachukwu & Vanessa Tchamyou, 2017. "A Literature Survey On Proposed African Monetary Unions," Journal of Economic Surveys, Wiley Blackwell, pages 878-902.

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