Optimum Currency Areas: Is Southern Africa ready to form a Monetary Union? PDF Download
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Author: Christian Sorgenfrei
Publisher: diplom.de
ISBN: 3842806868
Category : Political Science
Languages : en
Pages : 87
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Book Description
Inhaltsangabe:Introduction and Course of Work: In 2007, at their meeting in Tanzania, the central bank governors of the Southern African Development Community (SADC) laid out a strategy to strengthen regional integration, containing the development of a common market by 2015, fixed exchange rates by 2016, and, ultimately, a monetary union with a single currency in 2018. In pursuit of this agenda, a free trade area absent of intra-regional tariffs was arranged in August 2008 with a regional customs union to follow this year. The currently fourteen member countries of the SADC committed themselves towards achieving economic convergence and to deepen monetary cooperation. In the 21st century, Africa finds itself increasingly separated from economic developments in the remaining world and fails to prosper from increased globalization. Despite a large abundance in natural resources, many countries have suffered from an extremely poor economic performance, which mainly originated from internal strives and weak and distortionary policies. Inward looking governments, conducting clientele policies, are focused on reaping economic rents rather than on fostering growth. Furthermore, tribal conflicts and civil war have sparked recurring border conflicts with neighboring countries. Although Africa has seen a large number of regional arrangements and trading blocs throughout the continent, the overall success for growth and trade expansion was limited. Against this background, the formation of a monetary union is believed to counteract economic and political weaknesses, to improve regional cooperation and to enhance both the political and economic standing in the world. A monetary union and a common currency entails both gains and losses for its members. On the cost side, countries in a monetary union effectively loose the ability to pursue independent monetary policies and to use the exchange rate as adjustment instrument to stabilize the economy. On the other hand, countries inside a monetary union benefit from reduced transaction costs and the elimination of internal exchange rate volatility. Furthermore, countries which suffer from weak internal stability and high inflation rates benefit by using the fixed exchange rate in a monetary union as external anchor. By transferring the power over monetary policy to a supranational central bank, the risk of homegrown inflation and currency devaluations is banished and economic agents are able to borrow at more [...]
Author: Christian Sorgenfrei
Publisher: diplom.de
ISBN: 3842806868
Category : Political Science
Languages : en
Pages : 87
Get Book Here
Book Description
Inhaltsangabe:Introduction and Course of Work: In 2007, at their meeting in Tanzania, the central bank governors of the Southern African Development Community (SADC) laid out a strategy to strengthen regional integration, containing the development of a common market by 2015, fixed exchange rates by 2016, and, ultimately, a monetary union with a single currency in 2018. In pursuit of this agenda, a free trade area absent of intra-regional tariffs was arranged in August 2008 with a regional customs union to follow this year. The currently fourteen member countries of the SADC committed themselves towards achieving economic convergence and to deepen monetary cooperation. In the 21st century, Africa finds itself increasingly separated from economic developments in the remaining world and fails to prosper from increased globalization. Despite a large abundance in natural resources, many countries have suffered from an extremely poor economic performance, which mainly originated from internal strives and weak and distortionary policies. Inward looking governments, conducting clientele policies, are focused on reaping economic rents rather than on fostering growth. Furthermore, tribal conflicts and civil war have sparked recurring border conflicts with neighboring countries. Although Africa has seen a large number of regional arrangements and trading blocs throughout the continent, the overall success for growth and trade expansion was limited. Against this background, the formation of a monetary union is believed to counteract economic and political weaknesses, to improve regional cooperation and to enhance both the political and economic standing in the world. A monetary union and a common currency entails both gains and losses for its members. On the cost side, countries in a monetary union effectively loose the ability to pursue independent monetary policies and to use the exchange rate as adjustment instrument to stabilize the economy. On the other hand, countries inside a monetary union benefit from reduced transaction costs and the elimination of internal exchange rate volatility. Furthermore, countries which suffer from weak internal stability and high inflation rates benefit by using the fixed exchange rate in a monetary union as external anchor. By transferring the power over monetary policy to a supranational central bank, the risk of homegrown inflation and currency devaluations is banished and economic agents are able to borrow at more [...]
Author: Christian Sorgenfrei
Publisher: Diplomica Verlag
ISBN: 384285675X
Category : Business & Economics
Languages : en
Pages : 89
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Book Description
With the current situation in the European Monetary Union in mind, a Monetary Union in other parts of the world seems highly inadvisable. Nevertheless, Africa has some of the oldest Monetary arrangements in the world, dating back to the beginning of the 19th century. Is Africa particularly qualified for a Monetary Union? And furthermore, what features are necessary to make Monetary Arrangements between countries endurable? This study evaluates the prospects and the feasibility of a monetary union in the Southern African Development Community (SADC) from an economic point of view. Both the theory of optimum currency areas and the recent example of the European Monetary Union are employed to analyze the pros and cons of monetary unification. The theoretical implications are operationalized, first, by a broad analysis of economic and socio graphic data, and second, by estimating the degree of structural shock synchronization between SADC countries. Results obtained by an Autoregressive and Vector Autoregressive model indicate that a monetary union which includes all SADC members is neither desirable nor feasible in the foreseeable future. However, the study concludes that a small subset of countries, including South Africa, Namibia, Swaziland, Lesotho, Mozambique, Botswana and Zambia, could gain from forming a smaller monetary union.
Author: Raphael Abel Kasonga
Publisher:
ISBN:
Category : International economic integration
Languages : en
Pages : 80
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Book Description
Author: G. S. Tavlas
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
With the 14 members of the Southern African Development Community (SADC) having set the objective of adopting a common currency for the year 2018, an expanding empirical literature has emerged evaluating the benefits and costs of a common-currency area in Southern Africa. This paper reviews that literature, focusing on two categories of studies: (1) those that assume that a country's characteristics are invariant to the adoption of a common currency; and, (2) those that assume that a monetary union alters an economy's structure, resulting in trade creation and credibility gains. The literature review suggests that a relative-small group of countries, typically including South Africa, satisfies the criteria necessary for monetary unification. The literature also suggests that, in a monetary union comprised of all SADC countries and a regional central bank that sets monetary policy to reflect the average economic conditions (e.g., fiscal balances) in the region, the potential losses (i.e., higher inflation) from giving up an existing credible national central bank, a relevant consideration for South Africa, could outweigh any potential benefits of trade creation resulting from a common currency.
Author: Paul R. Masson
Publisher: Rowman & Littlefield
ISBN: 9780815797531
Category : Business & Economics
Languages : en
Pages : 248
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Book Description
Africa is working toward the goal of creating a common currency that would serve as a symbol of African unity. The advantages of a common currency include lower transaction costs, increased stability, and greater insulation of central banks from pressures to provide monetary financing. Disadvantages relate to asymmetries among countries, especially in their terms of trade and in the degree of fiscal discipline. More disciplined countries will not want to form a union with countries whose excessive spending puts upward pressure on the central bank's monetary expansion. In T he Monetary Geography of Africa, Paul Masson and Catherine Pattillo review the history of monetary arrangements on the continent and analyze the current situation and prospects for further integration. They apply lessons from both experience and theory that lead to a number of conclusions. To begin with, West Africa faces a major problem because Nigeria has both asymmetric terms of trade—it is a large oil exporter while its potential partners are oil importers—and most important, large fiscal imbalances. Secondly, a monetary union among all eastern or southern African countries seems infeasible at this stage, since a number of countries suffer from the effects of civil conflicts and drought and are far from achieving the macroeconomic stability of South Africa. Lastly, the plan by Kenya, Tanzania, and Uganda to create a common currency seems to be generally compatible with other initiatives that could contribute to greater regional solidarity. However, economic gains would likely favor Kenya, which, unlike the other two countries, has substantial exports to its neighbors, and this may constrain the political will needed to proceed. A more promising strategy for monetary integration would be to build on existing monetary unions—the CFA franc zone in western and central Africa and the Common Monetary Area in southern Africa. Masson and Pattillo argue that the goal of a creating a s
Author: Iyabo Masha
Publisher: INTERNATIONAL MONETARY FUND
ISBN: 9781451867220
Category :
Languages : en
Pages : 63
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Book Description
This study assesses the experience of the Common Monetary Area (CMA) based on available empirical evidence over the last two decades. It pays particular attention to member countries' adjustment to economic shocks in recent years and the inter-country linkages, including the spillover effects of policies. The paper draws the main lessons from the CMA experience, identifies key policy challenges, and discusses the issues facing the member countries in their efforts to achieve sustained growth. Implications for further economic integration in a broader regional context are also noted.
Author:
Publisher:
ISBN: 9780815733645
Category :
Languages : en
Pages :
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Author: Steven K. Buigut
Publisher:
ISBN: 9781109893625
Category :
Languages : en
Pages : 117
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Book Description
The dissertation assesses the suitability of countries in the Eastern and Southern Africa region for a monetary union. Using VAR techniques the symmetry of the underlying structural shocks is analyzed. The results indicate that supply and demand shocks are generally asymmetric, which does not lend strong support for forming a region-wide currency union at the moment. Although economic shocks are not highly correlated across the entire region, we tentatively identify three sub-regional clusters of countries that may benefit from a currency union. We find some tentative evidence that some, though not all, sub-regions may benefit from a link to the Euro. However, the speed and magnitude of adjustment to shocks is similar across the countries. Therefore, further integration of the economies might lead to more favorable conditions for a monetary union.
Author: Motshidisi Suzan Mokoena
Publisher:
ISBN:
Category : Africa, Southern
Languages : en
Pages : 82
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Book Description
Author: Ms.Catherine McAuliffe
Publisher: International Monetary Fund
ISBN: 1475586310
Category : Business & Economics
Languages : en
Pages : 55
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Book Description
The East African Community (EAC) has been among the fastest growing regions in sub-Saharan Africa in the past decade or so. Nonetheless, the recent growth path will not be enough to achieve middle-income status and substantial poverty reduction by the end of the decade—the ambition of most countries in the region. This paper builds on methodologies established in the growth literature to identify a group of countries that achieved growth accelerations and sustained growth to use as benchmarks to evaluate the prospects, and potential constraints, for EAC countries to translate their recent growth upturn into sustained high growth. We find that EAC countries compare favorably to the group of sustained growth countries—macroeconomic and government stability, favorable business climate, and strong institutions—but important differences remain. EAC countries have a smaller share of exports, lower degree of financial deepening, lower levels of domestic savings, higher reliance on donor aid, and limited physical infrastructure and human capital. Policy choices to address some of these shortcomings could make a difference in whether the EAC follows the path of sustained growth or follows other countries where growth upturns later fizzled out.
