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African Monetary Unions - Dominated by the North? Comment on 'The Common Monetary Area' by Martina Metzger and 'The CFA-Zone' by Jan Suchanek

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  • Kohnert, Dirk

Abstract

Monetary coordination is high on the agenda of different regional organizations in Africa. Economic benefits of a common currency, like lower transaction cost, increased macroeconomic stability, or the shielding of central banks against political pressure from nationalist elites and their inclination for excessive spending are undoubtedly expected. But the most important underlying aim of monetary integration in Africa is derived from its history, particularly the legacy of the slave trade and colonialism, and the subsequent strive for pan-African ideals, which has become manifest in the promotion of African unity in a crisis prone continent. However, whether it is feasible to achieve this ambitious political aim with economic means of regional economic and monetary cooperation, is open to question. Experts and the international donor community periodically caution about diverting attention from the most pressing needs of African countries by pursuing over-ambitious monetary policies. African governments should get the priorities right, i.e. they ought to implement first sustainable solutions to the problems of crisis resolution and prevention, the fight against corruption and rent-seeking elites, in order to promote good governance, transparency and accountability. The realities of African economies suggest that the grand new projects of monetary unions are unlikely to succeed. In addition, it is questionable whether economic, result-orientated reasoning and the discussion of monetary concepts (e.g. that of the Optimum Currency Area or of the Original Sin), which might be duly applied to Western or Latin American societies, have the same relevance in the African context.

Suggested Citation

  • Kohnert, Dirk, 2005. "African Monetary Unions - Dominated by the North? Comment on 'The Common Monetary Area' by Martina Metzger and 'The CFA-Zone' by Jan Suchanek," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 177-187.
  • Handle: RePEc:zbw:espost:118646
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    More about this item

    Keywords

    Monetary Union; Optimum Currency Area; CFA Zone; CMA; Sub-Saharan Africa; Neocolonialism; Common Monetary Area;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • P25 - Economic Systems - - Socialist Systems and Transition Economies - - - Urban, Rural, and Regional Economics
    • N97 - Economic History - - Regional and Urban History - - - Africa; Oceania
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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