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Welfare Effects of Monetary Integration; The Common Monetary Area and Beyond

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  • Tamon Asonuma
  • Xavier Debrun
  • Paul R Masson

Abstract

This paper proposes a quantitative assessment of the welfare effects arising from the Common Monetary Area (CMA) and an array of broader grouping among Southern African Development Community (SADC) countries. Model simulations suggest that (i) participating in the CMA benefits all members; (ii) joining the CMA individually is beneficial for all SADC members except Angola, Mauritius and Tanzania; (iii) creating a symmetric CMA-wide monetary union with a regional central bank carries some costs in terms of foregone anti-inflationary credibility; and (iv) SADC-wide symmetric monetary union continues to be beneficial for all except Mauritius, although the gains for existing CMA members are likely to be limited.

Suggested Citation

  • Tamon Asonuma & Xavier Debrun & Paul R Masson, 2012. "Welfare Effects of Monetary Integration; The Common Monetary Area and Beyond," IMF Working Papers 12/136, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:12/136
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    References listed on IDEAS

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    1. Cobham, David & Robson, Peter, 1994. "Monetary integration in Africa: A deliberately European perspective," World Development, Elsevier, vol. 22(3), pages 285-299, March.
    2. Jacques Mélitz, 1991. "Brussels on a single money," Open Economies Review, Springer, vol. 2(3), pages 323-336, October.
    3. Axel Boersch-Supan, 1999. "Incentive Effects of Social Security Under an Uncertain Disability Option," NBER Working Papers 7339, National Bureau of Economic Research, Inc.
    4. John Hawkins & Paul Masson, 2003. "Economic aspects of regional currency areas and the use of foreign currencies," BIS Papers chapters,in: Bank for International Settlements (ed.), Regional currency areas and the use of foreign currencies, volume 17, pages 4-42 Bank for International Settlements.
    5. 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.
    6. Mongelli, Francesco Paolo, 2002. "ìNew" Views on the Optimum Currency Area Theory: What is EMU Telling US?," Royal Economic Society Annual Conference 2002 140, Royal Economic Society.
    7. Martin, Philippe, 1995. "Free-riding, convergence and two-speed monetary unification in Europe," European Economic Review, Elsevier, vol. 39(7), pages 1345-1364, August.
    8. Debrun, Xavier, 2001. "Bargaining over EMU vs. EMS: Why Might the ECB Be the Twin Sister of the Bundesbank?," Economic Journal, Royal Economic Society, vol. 111(473), pages 566-590, July.
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    Cited by:

    1. Mulatu F. Zehirun & Marthinus C. Breitenbach & Francis Kemegue, 2014. "Monetary Integration in SADC: Assessment of Policy Coordination and Real Effective Exchange Rate Stability," Working Papers 201473, University of Pretoria, Department of Economics.

    More about this item

    Keywords

    Economic indicators; Southern African Development Community; Welfare; monetary policy; inflation; central bank; monetary union; monetary area;

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