Threshold Effect of Macroeconomic Convergence Criteria on Real GDP Growth Rate within the East African Community

Michael Oloo, Mary Mbithi and Martin Oleche
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Michael Oloo: University of Nairobi, Kenya
Mary Mbithi: University of Nairobi, Kenya
Martin Oleche: University of Nairobi, Kenya

European Journal of Development Studies, 2022, vol. 2, issue 2, 11-25

Abstract: This study investigates how the thresholds set by the East African Monetary Committee (EAMC) have impacted the growth of the East African Countries (Kenya, Tanzania, Uganda, Rwanda, and Burundi). The analysis establishes the actual thresholds supported by a panel data model, running from 2005 to 2020, which are drawn from World Development Indicators data from the World Bank website. The actual thresholds obtained are compared to the thresholds adopted by EAMC. This data was analysed using a Dynamic Threshold Panel model; the results show a slight deviation of the actual (optimal) data thresholds from the thresholds adopted as the EAC criteria for the formation of a Monetary Union. Therefore, there is need to reconsider the thresholds criteria to enable them to become feasible for the member states to achieve so as to form the Monetary Union.

Keywords: Budget Deficit; East African Community; External Reserves; GDP Growth; Inflation; Macroeconomic Convergence; Threshold Regression (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:epw:develo:v:2:y:2022:i:2:id:15067

DOI: 10.24018/ejdevelop.2022.2.2.67

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