Regional Integration in East Africa Diversity or Economic Conformity
The present paper examines the economic rationale for regional economic integration, such as a common market and currency union, in the East African Community (EAC). For that purpose, I examined the degree of regional economic interdependence in terms of trade, macroeconomic indicators, and real disturbances (IS shocks) in the EAC. First, I used the trade intensity indices (TTI) to examine whether the degree of trade interdependence in East Africa is higher or lower than that in other regions (e.g., Asia), and whether the region’s economic interdependence has deepened since the reformation of the EAC in 2000. Surprisingly, the interdependence in terms of trade in Africa is very strong, much stronger than that in Asian countries. Second, I investigated whether the macroeconomic links among the East African economies are strong and whether they became tighter in the 1990s. Relying on the principal component analysis, I have found that the degree of confluence in macroeconomic variables, such as inflation, growth, and exchange rates, is high in East Africa, although I did not observe a clear trend of increases. Third, relying on the theory of the optimum currency area, I examined the prospects for currency unification in the EAC. For that purpose, I examined the degree of synchronization of real disturbances (IS shocks) among EAC countries, and compared it with that among Asian countries. By applying the principal component analysis on IS shocks in each country, I found that the EAC countries face similar real disturbances. This suggests that the need for independent monetary policy is less than otherwise, and therefore the EAC is a good candidate for the optimal currency area. All these findings suggest that there is a strong case for a common market and currency union in the EAC.
|Date of creation:||29 Jun 2012|
|Contact details of provider:|| Postal: 6th-13th floors, Shinjuku Maynds Tower, 2-1-1 Yoyogi, Shibuya-ku, Tokyo 151-8558|
Web page: https://www.jica.go.jp/jica-ri/ja/index.html
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andrew K. Rose, 1999.
"One Money, One Market: Estimating the Effect of Common Currencies on Trade,"
NBER Working Papers
7432, National Bureau of Economic Research, Inc.
- Rose, Andrew K, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," CEPR Discussion Papers 2329, C.E.P.R. Discussion Papers.
- Rose, Andrew, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," Seminar Papers 678, Stockholm University, Institute for International Economic Studies.
- Ito, Takatoshi & Krueger, Anne O. (ed.), 1994. "Macroeconomic Linkage," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226386690.
- Lucas, Robert Jr., 1982. "Interest rates and currency prices in a two-country world," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 335-359. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:jic:wpaper:46. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Japan International Cooperation Agency Library)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.