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Are Proposed African Monetary Unions Optimal Currency Areas? Real and Monetary Policy Convergence Analysis

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  • Simplice A, Asongu

Abstract

A spectre is hunting embryonic African monetary zones: the EMU crisis. The introduction of common currencies in West and East Africa is facing stiff challenges in the timing of monetary convergence, the imperative of bankers to apply common modeling and forecasting methods of monetary policy transmission, as well as the requirements of common structural and institutional characteristics among candidate states. Inspired by the premise of the EMU crisis, this paper assesses real and monetary policy convergence within the proposed WAM and EAM zones. In the analysis, monetary policy targets inflation and financial dynamics of depth, efficiency, activity and size while real sector policy targets economic performance in terms of GDP growth at macro and micro levels. Findings suggest overwhelming lack of convergence; an indication that candidate countries still have to work towards harmonizing cross-country differences in fundamental, structural and institutional characteristics that hamper the convergence process.

Suggested Citation

  • Simplice A, Asongu, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real and Monetary Policy Convergence Analysis," MPRA Paper 36056, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:36056
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Simplice A. Asongu, 2014. "Does money matter in Africa?: New empirics on long- and short-run effects of monetary policy on output and prices," Indian Growth and Development Review, Emerald Group Publishing, vol. 7(2), pages 142-180, November.
    2. Asongu Simplice, 2011. "Government Quality Determinants of Stock Market Performance in African Countries," Working Papers 11/019, African Governance and Development Institute..
    3. Asongu, Simplice, 2014. "Real Effective Exchange Rate Imbalances and Macroeconomic Adjustments: evidence from the CEMAC zone," MPRA Paper 63154, University Library of Munich, Germany.
    4. Asongu Simplice, 2011. "Democracy and Stock Market Performance in African Countries," Working Papers 11/021, African Governance and Development Institute..
    5. Simplice A, Asongu, 2012. "Fighting software piracy: which IPRs laws (treaties) matter in Africa?," MPRA Paper 43590, University Library of Munich, Germany.

    More about this item

    Keywords

    Currency Area; Convergence; Policy Coordination; Africa;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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