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Southern African Economic Integration: Evidence from an Augmented Gravity Model


  • Warin, Thierry

    () (Middlebury College)

  • Wunnava, Phanindra V.

    () (Middlebury College)

  • Tengia, Optat

    () (Brown University)

  • Wandschneider, Kirsten

    () (Occidental College)


This paper investigates the feasibility of creating a common-currency union consisting of 16 countries in Southern Africa. We estimate an augmented-gravity model that includes public deficit, public debt, public expenditure, inflation, and the foreign reserves position. We also integrate Africa-specific variables such as existing economic blocs in the region, colonial heritage, and the convergence of living standards. Our analysis shows that the prospect for further integration in Southern Africa is promising, but many challenges still persist. The existing economic blocs can provide a first stepping stone to a larger currency union, but countries continuously have to cultivate good governance and fiscal discipline.

Suggested Citation

  • Warin, Thierry & Wunnava, Phanindra V. & Tengia, Optat & Wandschneider, Kirsten, 2009. "Southern African Economic Integration: Evidence from an Augmented Gravity Model," IZA Discussion Papers 4316, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4316

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    References listed on IDEAS

    1. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-1025, July.
    2. Thierry Warin, 2005. "The Hidden Structural Features of the Fiscal Rule: A European Saga," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 11(1), pages 29-38, February.
    3. A. Bhargava & L. Franzini & W. Narendranathan, 2006. "Serial Correlation and the Fixed Effects Model," World Scientific Book Chapters,in: Econometrics, Statistics And Computational Approaches In Food And Health Sciences, chapter 4, pages 61-77 World Scientific Publishing Co. Pte. Ltd..
    4. Cobham, David & Robson, Peter, 1994. "Monetary integration in Africa: A deliberately European perspective," World Development, Elsevier, vol. 22(3), pages 285-299, March.
    5. 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 412-444, October.
    6. 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.
    7. Mamadou Wane & Paul Burkett & Robert Guell, 1996. "Economic growth and monetary union in sub-Saharan Africa: new evidence on the effects of CFA-zone membership," Applied Economics Letters, Taylor & Francis Journals, vol. 3(12), pages 769-773.
    8. Thierry Warin & Phanindra V. Wunnava & Hubert P. Janicki, 2009. "Testing Mundell's Intuition of Endogenous OCA Theory," Review of International Economics, Wiley Blackwell, vol. 17(1), pages 74-86, February.
    9. Padamja Khandelwal, 2004. "Comesa and Sadc; Prospects and Challenges for Regional Trade Integration," IMF Working Papers 04/227, International Monetary Fund.
    10. repec:kap:iaecre:v:11:y:2005:i:1:p:29-38 is not listed on IDEAS
    11. Agnès Bénassy-Quéré & Maylis Coupet, 2005. "On the Adequacy of Monetary Arrangements in Sub-Saharan Africa," The World Economy, Wiley Blackwell, vol. 28(3), pages 349-373, March.
    12. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate of the Effect of Common Currencies on Trade and Income," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 437-466.
    13. Mkenda, Beatrice Kalinda, 2001. "Is East Africa an Optimum Currency Area?," Working Papers in Economics 41, University of Gothenburg, Department of Economics.
    14. John Anyanwu, 2003. "Estimating the Macroeconomic Effects of Monetary Unions: The Case of Trade and Output," African Development Review, African Development Bank, vol. 15(2‐3), pages 126-145.
    15. Baltagi, Badi H. & Wu, Ping X., 1999. "Unequally Spaced Panel Data Regressions With Ar(1) Disturbances," Econometric Theory, Cambridge University Press, vol. 15(06), pages 814-823, December.
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    Cited by:

    1. Sylvanus Kwaku Afesorgbor & Peter A. G. Bergeijk, 2014. "Measuring Multi-Membership in Economic Integration and Its Trade Impact: A Comparative Study of ECOWAS and SADC," South African Journal of Economics, Economic Society of South Africa, vol. 82(4), pages 518-530, December.
    2. Afesorgbor, Sylvanus Kwaku & van Bergeijk, Peter A.G., 2011. "Multi-membership and effectiveness of regional trade agreements in Western and Southern Africa: a comparative study of ECOWAS and SADC," Proceedings of the German Development Economics Conference, Berlin 2011 1, Verein für Socialpolitik, Research Committee Development Economics.

    More about this item


    optimum currency area; gravity model; Southern African integration; endogenous optimum currency area theory;

    JEL classification:

    • F1 - International Economics - - Trade
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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