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The viability of an economic and monetary union in Africa with a unified currency: evidence from the African economies' reactions to the international income, price and monetary shocks

Listed author(s):
  • Giscard Assoumou Ella


    (LEAD - Laboratoire d'Économie Appliquée au Développement - UTLN - Université de Toulon)

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    The purpose of this paper is to provide a framework to analyze the feasibility of an economic and monetary union in Africa with a common currency. In this context, the present study has two objectives. The first one is to analyze the impacts of the international income, price and monetary shocks on real GDP, household consumption and consumer prices index in 17 African countries using a SVAR model for the period 1970-2007. The research methodology adopted in this study suggests that 16 countries are exposed to the international income shock, nine to the international price shock and 10 to the international monetary shock. A decrease in real OECD GDP has a negative impact on real GDP, household consumption and consumer prices index, and inversely in the case of an increase. A decrease in current Federal funds effective rate has a positive effect on those variables, and inversely. World price of oil impacts essentially African oil producers, with a decrease affecting negatively their economies and an increase positively. The second one is to compare African economies' orthogonal impulse response functions to those international shocks. It can be observed that the functions tend to be similar in the cases of the real GDP and household consumption's reactions, and more or less similar in the case of the consumer prices index responses. This analysis emphasizes that the possibility of creating an economic union in Africa with a common currency does exist.

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    Paper provided by HAL in its series Working Papers with number hal-00851594.

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    Date of creation: 26 May 2013
    Handle: RePEc:hal:wpaper:hal-00851594
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    1. Jean-Baptiste Gossé & Cyriac Guillaumin, 2010. "L’impact des chocs externes sur et à l’intérieur de la zone euro : les enseignements d’un modèle vectoriel autorégressif structurel," Économie et Prévision, Programme National Persée, vol. 195(4), pages 15-33.
    2. Sato, Kiyotaka & Zhang, Zhaoyong & McAleer, Michael, 2011. "Identifying shocks in regionally integrated East Asian economies with structural VAR and block exogeneity," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 81(7), pages 1353-1364.
    3. Naudé, Wim & Saayman, Andrea, 2005. "Determinants of tourist arrivals in Africa: a panel data regression analysis," MPRA Paper 16479, University Library of Munich, Germany.
    4. Giscard Assoumou Ella, 2012. "Responses of African economies to the international economic shocks: an empirical study," Working Papers hal-00721633, HAL.
    5. Raju Jan Singh & Markus Haacker & Kyung-woo Lee & Maëlan Le Goff, 2011. "Determinants and Macroeconomic Impact of Remittances in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 20(2), pages 312-340, March.
    6. M. Ayhan Kose & Raymond Riezman, 2013. "Trade shocks and macroeconomic fluctuations in Africa," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 19, pages 369-394 World Scientific Publishing Co. Pte. Ltd..
    7. Steven Buigut, 2004. "Seigniorage and the Proposed East Africa Community (EAC) Monetary Union," The African Finance Journal, Africagrowth Institute, vol. 6(2), pages 36-46.
    8. Céline Gimet, 2007. "L'impact des chocs externes dans les économies du Mercosur: un modèle VAR Structurel," Post-Print halshs-00356105, HAL.
    9. Coulibaly, Issiaka & Gnimassoun, Blaise, 2013. "Optimality of a monetary union: New evidence from exchange rate misalignments in West Africa," Economic Modelling, Elsevier, vol. 32(C), pages 463-482.
    10. Giscard Assoumou Ella & Cécile Bastidon, 2015. "Canal du commerce extérieur, politiques publiques et spécialisation des PED africains: étude empirique," African Development Review, African Development Bank, vol. 27(2), pages 171-184, 06.
    11. Celine Gimet, 2007. "L'impact des chocs externes dans les economies du Mercosur : un modele var structurel," Economie Internationale, CEPII research center, issue 110, pages 107-136.
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