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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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  17. Jan Willem Gunning & Paul Collier, 1999. "Explaining African Economic Performance," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 64-111, March.
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