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Regime-dependent monetary policy convergence: the case of southern African development community (SADC)

Author

Listed:
  • Emmanuel Anoruo
  • Yusuf Ahmad

    (Coppin State University, USA
    The World Bank, USA)

Abstract

This paper examines the issue of monetary policy convergence for members of the Southern African Development Community (SADC) using the Markov Switching unit root procedure. The results from the conventional unit root tests including the Dickey-Fuller and the modified Dickey-Fuller reveal that the exchange rate and inflation series are first difference stationary. The likelihood ratio tests suggest that the results from the Markov Switching ADF model should be preferred over those from the standard unit root testing procedures. In most of the cases, the results from the Markov switching ADF procedures indicate that the nominal exchange rate series are characterized by two stationary regimes. This finding provides evidence of monetary convergence among the SADC member countries. The existence of monetary convergence suggests that SADC member countries are likely to satisfy their macroeconomic convergence targets and hence attain some form of Maastricht-type criteria.

Suggested Citation

  • Emmanuel Anoruo & Yusuf Ahmad, 2013. "Regime-dependent monetary policy convergence: the case of southern African development community (SADC)," Journal of Developing Areas, Tennessee State University, College of Business, vol. 47(1), pages 75-90, January-J.
    • Handle: RePEc:jda:journl:vol.47:year:2013:issue1:pp:75-90
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    More about this item

    Keywords

    Monetary Convergence; SADC; Regime-Switching; Exchange Rate;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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