IDEAS home Printed from https://ideas.repec.org/a/oup/jafrec/v16y2007i2p234-258.html
   My bibliography  Save this article

Is Africa an Optimum Currency Area? A Comparison of Macroeconomic Costs and Benefits

Author

Listed:
  • Georgios Karras

Abstract

This article examines the macroeconomic costs and benefits of adopting a common currency for 37 African countries. Economic theory suggests that the main benefit is enhanced price stability, whereas the main cost is higher business-cycle volatility if the member country's output is not sufficiently correlated with Africa's as a whole. Using data from 1960 to 2000, the article finds that the estimated cost and benefit measures exhibit substantial variability across the countries and are sometimes positively correlated: countries (such as Uganda, Ghana and Guinea) that have a lot to gain from a monetary union, also have a lot to lose from it; whereas other economies (such as Morocco, Cote d'Ivoire and Gabon) that have little to lose by adopting a common African currency, have also little to gain by it. The empirical results can also be used to compare net benefits for individual countries, showing, for example, that Nigeria is a more promising candidate for membership in an African monetary union than Kenya, and that Zambia is an unambiguously better candidate than either Benin or Mauritius. Copyright 2007, Oxford University Press.

Suggested Citation

  • Georgios Karras, 2007. "Is Africa an Optimum Currency Area? A Comparison of Macroeconomic Costs and Benefits," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 16(2), pages 234-258, March.
  • Handle: RePEc:oup:jafrec:v:16:y:2007:i:2:p:234-258
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

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


    Cited by:

    1. George S. Tavlas, 2009. "The Benefits And Costs Of Monetary Union In Southern Africa: A Critical Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 23(1), pages 1-43, February.
    2. Fabrizio Carmignani, 2010. "Endogenous Optimal Currency Areas: the Case of the Central African Economic and Monetary Community," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 19(1), pages 25-51, January.
    3. Agénor, Pierre-Richard & Aizenman, Joshua, 2011. "Capital market imperfections and the theory of optimum currency areas," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1659-1675.
    4. Ricci, Luca Antonio, 2008. "A Model of an Optimum Currency Area," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 2, pages 1-31.
    5. Omotor, Douglason G. & Niringiye, Aggrey, 2011. "Optimum Currency Area and Shock Asymmetry: A Dynamic Analysis of the West African Monetary Zone (WAMZ)," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 71-82, September.

    More about this item

    Statistics

    Access and download statistics

    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:oup:jafrec:v:16:y:2007:i:2:p:234-258. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/csaoxuk.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.