Are East African Countries Ready for a Common Currency? A Structural Vector Autoregression Analysis

Matteo Falagiarda

Rivista di Politica Economica, 2009, vol. 99, issue 4, 153-204

Abstract: The East African Community (EAC), a regional block composed of Burundi, Kenya, Rwanda, Tanzania and Uganda, has monetary integration as one of its short-term goals. This paper empirically investigates the suitability of such a project by using two different Structural Vector Autoregression (SVAR) models, which allow to identify the underlying structural shocks of the economies. The results indicate that the business cycles of these countries are generally not symmetric, and the five economies respond quite differently to shocks, suggesting that the EAC does not yet constitute an Optimum Currency Area (OCA).

Keywords: optimum currency areas; monetary union; structural vector autoregressions; East African Community (search for similar items in EconPapers)
JEL-codes: C32 E42 F15 F33 (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:rpo:ripoec:v:99:y:2009:i:4:p:153-204

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