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The Long-Run Stability of Money in the ProposedE ast AfricanMonetary Union

Simplice Asongu (), Oludele E. Folarin () and Nicholas Biekpe ()
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Oludele E. Folarin: University of Ibadan, Nigeria, Postal: University of Ibadan, Ibadan, Nigeria
Nicholas Biekpe: University of Cape Town, South Africa, Postal: University of Cape Town, Cape, Town, South Africa

Journal of Economic Integration, 2020, vol. 35, issue 3, 457-478

Abstract: This study investigates the stability of money in the proposed East African Monetary Union using annual data within 1981-2015 of five countries comprising the East African Community.A standard money demand function is designed and estimated using a bounds testing approach to cointegration and error correction modeling.F indings show that countries exhibit divergence that is articulated in terms of differences in cumulative sum (CUSUM) and CUSUM squared (CUSUMSQ) tests, short- and long-term determinants, and error correction during a shock.B ased on the CUSUM and CUSUMSQ tests, results show that Burundi, Rwanda, and Tanzania have stable money demand, whereas the remaining countries, namely, Kenya and Uganda, have partial stability only.D uring a shock, Kenya is the fastest to restore its long-run equilibrium, followed by Tanzania and Burundi.

Keywords: Stable; demand for money; bounds test (search for similar items in EconPapers)
JEL-codes: C22 E41 O55 (search for similar items in EconPapers)
Date: 2020
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Working Paper: The Long Run Stability of Money in the Proposed East African Monetary Union (2020) Downloads
Working Paper: The Long Run Stability of Money in the Proposed East African Monetary Union (2020) Downloads
Working Paper: The Long Run Stability of Money in the Proposed East African Monetary Union (2020) Downloads
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