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On the feasibility of a monetary union in the Southern Africa Development Community

This paper investigates the feasibility of a monetary union in Southern Africa Development Community (SADC) by looking at evidence of nominal exchange rate and inflation convergence. Using a methodology based on estimating time varying parameters, the evidence suggests non-convergence. The non-convergence of nominal exchange rate and consumer price inflation suggests that presently, the chances of SADC member countries satisfying some form of Maastricht-type criteria is quite low.

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Paper provided by Hunter College Department of Economics in its series Economics Working Paper Archive at Hunter College with number 306.

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Length: 25 pages
Date of creation: 2003
Date of revision: 2003
Handle: RePEc:htr:hcecon:306
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  1. Mark Holmes, 2002. "Panel data evidence on inflation convergence in the European Union," Applied Economics Letters, Taylor & Francis Journals, vol. 9(3), pages 155-158.
  2. Bayoumi, Tamim & Ostry, Jonathan D, 1997. "Macroeconomic Shocks and Trade Flows within Sub-Saharan Africa: Implications for Optimum Currency Arrangements," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(3), pages 412-44, October.
  3. Hall, S G & Robertson, D & Wickens, M R, 1992. "Measuring Convergence of the EC Economies," The Manchester School of Economic & Social Studies, University of Manchester, vol. 60(0), pages 99-111, Supplemen.
  4. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
  5. Bayoumi, T. & Eichengreen, B., 1994. "One Money or Many? Analysing the Prospects for Monetary Unification in Various Parts of the World," Princeton Studies in International Economics 76, International Economics Section, Departement of Economics Princeton University,.
  6. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July.
  7. Alberto Alesina & Robert Barro & Silvana Tenreyro, 2002. "Optimal Currency Areas," Harvard Institute of Economic Research Working Papers 1958, Harvard - Institute of Economic Research.
    • Alberto Alesina & Robert J. Barro & Silvana Tenreyro, 2003. "Optimal Currency Areas," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 301-356 National Bureau of Economic Research, Inc.
  8. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
  9. Mills, Terence C & Holmes, Mark J, 1999. "Common Trends and Cycles in European Industrial Production: Exchange Rate Regimes and Economic Convergence," Manchester School, University of Manchester, vol. 67(4), pages 557-87, September.
  10. Robert J. Barro & David B. Gordon, 1983. "Rules, Discretion and Reputation in a Model of Monetary Policy," NBER Working Papers 1079, National Bureau of Economic Research, Inc.
  11. X. P. Guma*, 1985. "The Rand Monetary Area Agreement," South African Journal of Economics, Economic Society of South Africa, vol. 53(2), pages 109-120, 06.
  12. Hall, Stephen G & Robertson D & Wickens, M R, 1997. "Measuring Economic Convergence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(2), pages 131-43, April.
  13. Arvind Subramanian, 2000. "Trade and Trade Policies in Eastern and Southern Africa," IMF Occasional Papers 196, International Monetary Fund.
  14. Jeffrey A. Frankel & Andrew K. Rose, 1996. "The Endogeneity of the Optimum Currency Area Criteria," NBER Working Papers 5700, National Bureau of Economic Research, Inc.
  15. 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.
  16. Rodney Thom, 1995. "Inflation convergence in the EMS: Some additional evidence. A comment," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 131(3), pages 577-586, September.
  17. Guglielmo Caporale & Nikitas Pittis, 1993. "Common stochastic trends and inflation convergence in the EMS," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 129(2), pages 207-215, June.
  18. Lafrance, Robert & St-Amant, Pierre, 1999. "Optimal Currency Areas: A Review of the Recent Literature," Staff Working Papers 99-16, Bank of Canada.
  19. Frankel, Jeffrey A. & Rose, Andrew K., 1997. "Is EMU more justifiable ex post than ex ante?," European Economic Review, Elsevier, vol. 41(3-5), pages 753-760, April.
  20. Ademola Oyejide, T., 1997. "Regional Integration and Trade Liberalization in Sub-Saharan Africa," Papers 28s, African Economic Research Consortium.
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