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Are Africa's Currency Unions Good for Trade?

  • Charalambos Tsangarides
  • Pierre Ewenczyk
  • Michal Hulej
  • Mahvash Saeed Qureshi

This paper explores and quantifies several aspects of the performance of Africa's currency unions. It benchmarks Africa's experience with that of the world using an augmented version of the gravity model and applying a comprehensive set of robustness checks. The empirical findings suggest that membership in a currency union should benefit Africa as much as it does the rest of the world. In addition, for both samples, we find evidence that (1) there is a significant currency union trade-generating effect; (2) currency unions are associated with trade creation and increased price comovements among member countries; and (3) the duration of currency union membership matters for trade: longer duration brings about greater benefits, and vice versa, however with some diminishing returns.

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Article provided by Palgrave Macmillan in its journal IMF Staff Papers.

Volume (Year): 56 (2009)
Issue (Month): 4 (November)
Pages: 876-918

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Handle: RePEc:pal:imfstp:v:56:y:2009:i:4:p:876-918
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