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Will the Euro trigger more monetary unions in Africa?

  • Honohan, Patrick
  • Lane, Philip R.

The authors analyze the prospects for greater monetary integration in Africa, in the wake of the European Monetary Union. They argue that the structural characteristics of African economies, are quite different from those of European economies, but that much can be gained from monetary cooperation - as an external agency of restraint, and for promoting stability in the financial sector. But one should not expect too much from such arrangements. There is little evidence of contagious attacks on African currencies requiring the coordination of exchange rate policies. And economies of scale in the prudential regulation of financial systems, could be achieved through international cooperation without the need for a common currency. The same is true of enhanced risk-pooling through the financial system. The European Monetary Union has only a marginal impact on the net benefits of monetary cooperation, but the euro would be a natural anchor for any African monetary union - especially if the United Kingdom, and the sterling were to join the European Monetary Union. Indeed, the most likely route to new monetary cooperation in Africa, is through a common peg to the euro.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2393.

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Date of creation: 31 Jul 2000
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Handle: RePEc:wbk:wbrwps:2393
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  1. Barry Eichengreen, 2000. "Does Mercosur Need a Single Currency?," International Finance 0003006, EconWPA.
  2. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini & Cedric Tille, 1999. "Competitive Devaluations: A Welfare-Based Approach," NBER Working Papers 6889, National Bureau of Economic Research, Inc.
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  4. Roberto Chang & Andrés Velasco, 2000. "Liquidity Crises in Emerging Markets: Theory and Policy," NBER Chapters, in: NBER Macroeconomics Annual 1999, Volume 14, pages 11-78 National Bureau of Economic Research, Inc.
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  6. Barry Eichengreen, 1998. "Exchange Rate Stability and Financial Stability," Open Economies Review, Springer, vol. 9(1), pages 569-608, January.
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  14. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
  15. Charles Wyplosz, 1997. "EMU: Why and How It Might Happen," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 3-21, Fall.
  16. Patrick Honohan & Stephen A. O'Connell, 1997. "Contrasting Monetary Regimes in Africa," IMF Working Papers 97/64, International Monetary Fund.
  17. Barry J. Eichengreen, 1999. "Policy making in an integrated world: from surveillance to ...?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 43(Jun), pages 205-241.
  18. Stasavage, David, 1997. "The CFA Franc Zone and Fiscal Discipline," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(1), pages 132-67, March.
  19. Willem H. Buiter, 1999. "The EMU and the NAMU: What is the Case for North American Monetary Union?," Canadian Public Policy, University of Toronto Press, vol. 25(3), pages 285-305, September.
  20. Andrew K. Rose, 1999. "Is there a case for an Asian Monetary Fund?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue dec17.
  21. Velasco, A., 1999. "Policy Responses to Currency Crises," Working Papers 99-15, C.V. Starr Center for Applied Economics, New York University.
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