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Currency Union in the East African Community: A Fractional Integration Approach

In: Economic Integration, Currency Union, and Sustainable and Inclusive Growth in East Africa

Author

Listed:
  • Hector Carcel

    (University of Navarra
    University of Navarra)

  • Luis A. Gil-Alana

    (University of Navarra
    University of Navarra)

  • Godfrey Madigu

    (University of Navarra
    University of Navarra)

Abstract

This study examines inflation rates in the five countries that belong to the East African Community (EAC) and which recently signed a protocol outlining their plans for launching a monetary union within 10 years. Its aim is to examine the persistence in inflation levels. As literature argues about monetary unions, countries hoping to form a union should present similar inflation patterns. Our study shows that the countries present non-mean reversion, confirming that shocks will not recover in the long run. Moreover, fractional co-integration relationships are found between all countries with the exception of Tanzania.

Suggested Citation

  • Hector Carcel & Luis A. Gil-Alana & Godfrey Madigu, 2016. "Currency Union in the East African Community: A Fractional Integration Approach," Advances in African Economic, Social and Political Development, in: Almas Heshmati (ed.), Economic Integration, Currency Union, and Sustainable and Inclusive Growth in East Africa, pages 41-54, Springer.
    • Handle: RePEc:spr:aaechp:978-3-319-30432-8_3
    DOI: 10.1007/978-3-319-30432-8_3
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