Design and Implementation of a Common Currency Area in the East African Community
The East African Community (EAC) has fast-tracked its plans to create a single currency for the five countries making up the region, and hopes to conclude negotiations on a monetary union protocol by the end of 2012. While the benefits of lower transactions costs from a common currency may be significant, countries will also lose the ability to use monetary policy to respond to different shocks. Evidence presented shows that the countries differ in a number of respects, facing asymmetric shocks and different production structures. Countries have had difficulty meeting convergence criteria, most seriously as concerns fiscal deficits. Preparation for monetary union will require effective institutions for macroeconomic surveillance and enforcing fiscal discipline, and euro zone experience indicates that these institutions will be difficult to design and take a considerable time to become effective. This suggests that a timetable for monetary union in the EAC should allow for a substantial initial period of institution building. In order to have some visible evidence of the commitment to monetary union, in the meantime the EAC may want to consider introducing a common basket currency in the form of notes and coin, to circulate in parallel with national currencies.
|Date of creation:||04 Apr 2012|
|Contact details of provider:|| Postal: 150 St. George Street, Toronto, Ontario|
Phone: (416) 978-5283
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.:
- MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999.
"Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 14(5), pages 563-577, Sept.-Oct.
- James G. MacKinnon & Alfred A. Haug & Leo Michelis, 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Working Papers 1996_07, York University, Department of Economics.
- Mackinnon, J.G. & Haug, A.A. & Michelis, L., 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," G.R.E.Q.A.M. 96a09, Universite Aix-Marseille III.
- Christopher S. Adam & Pantaleo Kessy & Camillus Kombe & Stephen O’Connell, 2012. "Exchange Rate Arrangements in the Transition to East African Monetary Union," CSAE Working Paper Series 2012-07, Centre for the Study of African Economies, University of Oxford.
- Jonung, Lars & Sjöholm, Fredrik, 1998.
"Should Finland and Sweden Form a Monetary Union?,"
SSE/EFI Working Paper Series in Economics and Finance
224, Stockholm School of Economics.
- Kishor, N. Kundan & Ssozi, John, 2009. "Is the East African Community an Optimum Currency Area?," MPRA Paper 17645, University Library of Munich, Germany.
- Enders, Walter & Hurn, Stan, 1994. "Theory and Tests of Generalized Purchasing-Power Parity: Common Trends and Real Exchange Rates in the Pacific Rim," Review of International Economics, Wiley Blackwell, vol. 2(2), pages 179-190, June.
- Steven K. Buigut & Neven Valev, 2004.
"Is the Proposed East African Monetary Union an Optimal Currency Area? A Structural Vector Autoregression Analysis,"
International Center for Public Policy Working Paper Series, at AYSPS, GSU
paper0407, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Buigut, Steven K. & Valev, Neven T., 2005. "Is the proposed East African Monetary Union an optimal currency area? a structural vector autoregression analysis," World Development, Elsevier, vol. 33(12), pages 2119-2133, December.
- Xavier Debrun & Catherine A Pattillo & Paul R Masson, 2010. "Should African Monetary Unions Be Expanded? An Empirical Investigation of the Scope for Monetary Integration in Sub-Saharan Africa," IMF Working Papers 10/157, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:tor:tecipa:tecipa-451. 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: (RePEc Maintainer)
If references are entirely missing, you can add them using this form.