IDEAS home Printed from https://ideas.repec.org/a/eme/igdrpp/v3y2010i1p36-52.html
   My bibliography  Save this article

Inflation convergence and currency unions: the case of the East African community

Author

Listed:
  • Narayan Kishor
  • John Ssozi

Abstract

Purpose - The purpose of this paper is to investigate inflation convergence within the East African Community (EAC) as it aspires to become a currency union. Design/methodology/approach - An unobserved dynamic factor model was used to decompose the variation in inflation into a component that is common across the countries in the EAC region and a component that is country specific. Convergence was measured by the percentage of variation in inflation that is common across countries. Findings - The estimated results from the dynamic factor model for the pre‐EAC Treaty (1981:3 to 2000:2) period and post‐EAC Treaty (2000:3 to 2009:1) period suggest that the percentage variation in inflation in the EAC that is explained by the common regional component increased significantly during the post‐Treaty period. Research limitations/implications - One of the limitations of this paper is that it does not address the mechanism through which the convergence in a currency union is achieved. Future research should try to examine the link between convergence and different macroeconomic policies. Practical implications - This paper suggests that the push towards forming a currency union in East Africa has led to a greater degree of inflation synchronization across different countries in the region. Originality/value - The main contribution of this paper is to use an unobserved component model to estimate the degree of inflation synchronization in East African countries.

Suggested Citation

  • Narayan Kishor & John Ssozi, 2010. "Inflation convergence and currency unions: the case of the East African community," Indian Growth and Development Review, Emerald Group Publishing Limited, vol. 3(1), pages 36-52, April.
    • Handle: RePEc:eme:igdrpp:v:3:y:2010:i:1:p:36-52
    DOI: 10.1108/17538251011035864
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/17538251011035864/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/17538251011035864/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/17538251011035864?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Asongu Simplice, 2013. "Does Money Matter in Africa? New Empirics on Long- and Short-run Effects of Monetary Policy on Output and Prices," Working Papers of the African Governance and Development Institute. 13/005, African Governance and Development Institute..
    2. Simplice Asongu, 2016. "New empirics of monetary policy dynamics: evidence from the CFA franc zones," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 7(2), pages 164-204, June.
    3. Dridi, Jemma & Nguyen, Anh D. M., 2017. "Inflation Convergence In East African Countries," MPRA Paper 80393, University Library of Munich, Germany.
    4. Kigabo-Rusuhuzwa, Thomas & Heshmati, Almas, 2022. "Are the East African Community's Countries Ready for a Common Currency?," IZA Discussion Papers 15210, Institute of Labor Economics (IZA).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:igdrpp:v:3:y:2010:i:1:p:36-52. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.