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Making and breaking monetary policy rules: the experience of African countries


  • Dominique Guillaume
  • David Stasavage


This paper analyses the experience with rule-based monetary policy in African countries which have participated in monetary unions (CFA Franc Zone, Eastern African Currency Board and Rand Monetary Area). We show that African countries have generally lacked the domestic political institutions which would allow individual governments to tie their hands by establishing such rules. Monetary unions have proved to be an alternative possibility for credible commitment to sound macroeconomic policies, but only in cases where exit from a union is made costly by the provision of side-payments (or sanctions) in other areas of regional co-operation, and only when governance structures have been designed so as to maximise chances for the enforcement of monetary rules. We conclude by making suggestions about the design of African monetary unions.

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  • Dominique Guillaume & David Stasavage, 1999. "Making and breaking monetary policy rules: the experience of African countries," CSAE Working Paper Series 1999-02, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:1999-02

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    References listed on IDEAS

    1. Frankel, J-A & Rose, A-K, 1996. "Economic Structure and the Decision to Adopt a Common Currency," Papers 611, Stockholm - International Economic Studies.
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    Cited by:

    1. Guillaume, Dominique M. & Stasavage, David, 2000. "Improving Policy Credibility: Is There a Case for African Monetary Unions?," World Development, Elsevier, vol. 28(8), pages 1391-1407, August.
    2. Kapstein, Ethan & Converse, Nathan, 2006. "The Economics of Young Democracies: Policies and Performance," MPRA Paper 553, University Library of Munich, Germany.
    3. Ethan Kapstein & Nathan Converse, 2006. "The Economics of Young Democracies: Policies and Performance," Working Papers 85, Center for Global Development.

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