EconPapers    
Economics at your fingertips  
 

Are Proposed African Monetary Unions Optimal Currency Areas? Real and Monetary Policy Convergence Analysis

Simplice Asongu

No 12/005, Working Papers of the African Governance and Development Institute. from African Governance and Development Institute.

Abstract: Purpose – A spectre is hunting embryonic African monetary zones: the EMU crisis. This paper assesses real and monetary policy convergence within the proposed WAM and EAM zones. The introduction of common currencies in West and East Africa is facing stiff challenges in the timing of monetary convergence, the imperative of bankers to apply common modeling and forecasting methods of monetary policy transmission, as well as the requirements of common structural and institutional characteristics among candidate states. Design/methodology/approach – In the analysis, monetary policy targets inflation and financial dynamics of depth, efficiency, activity and size while real sector policy targets economic performance in terms of GDP growth at macro and micro levels. Findings – Findings suggest overwhelming lack of convergence: (1) initial conditions for financial development are different across countries; (2) fundamental characteristics as common monetary policy initiatives and IMF backed financial reform programs are implemented differently across countries; (3) there is remarkable evidence of cross-country variations in structural characteristics of macroeconomic performance; (4) institutional cross-country differences could also be responsible for the deficiency in convergence within the potential monetary zones. Practical implications – As a policy implication, heterogeneous structural and institutional characteristics across countries are giving rise to different levels and patterns of financial intermediary development. Thus member states should work towards harmonizing cross-country differences in structural and institutional characteristics that hamper the effectiveness of convergence in monetary and real policies. Originality/value – It is one of the few attempts to investigate the issue of convergence within the proposed WAM and EAM unions.

Keywords: Currency Area; Convergence; Policy Coordination; Africa (search for similar items in EconPapers)
JEL-codes: F15 F36 F42 O55 P52 (search for similar items in EconPapers)
Pages: 29
Date: 2012-01-19
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.afridev.org/RePEc/agd/agd-wpaper/Are-Pr ... ergence-Analysis.pdf Revised version, 2013 (application/pdf)

Related works:
Working Paper: Are Proposed African Monetary Unions Optimal Currency Areas? Real and Monetary Policy Convergence Analysis (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:agd:wpaper:12/005

Access Statistics for this paper

More papers in Working Papers of the African Governance and Development Institute. from African Governance and Development Institute. Contact information at EDIRC.
Bibliographic data for series maintained by Asongu Simplice ().

 
Page updated 2025-03-22
Handle: RePEc:agd:wpaper:12/005