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Should African Monetary Unions Be Expanded? An Empirical Investigation of the Scope for Monetary Integration in Sub-Saharan Africa
Author:
Mr. Xavier Debrun
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,
Ms. Catherine A Pattillo
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, and
Mr. Paul R Masson
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Series:
IMF Working Papers
Volume/Issue:
Volume 2010: Issue 157
Language:
English
Publication Date:
01 Jul 2010
DOI:
https://doi.org/10.5089/9781455201402.001
ISBN:
9781455201402
ISSN:
1018-5941
Pages:
68
Keywords:
WP; central bank; monetary policy; CFA franc
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper develops a full-fledged cost-benefit analysis of monetary integration, and applies it to the currency unions actively pursued in Africa. The benefits of monetary union come from a more credible monetary policy, while the costs derive from real shock asymmetries and fiscal disparities. The model is calibrated using African data. Simulations indicate that the proposed EAC, ECOWAS, and SADC monetary unions bring about net benefits to some potential members, but modest net gains and sometimes net losses for others. Strengthening domestic macroeconomic frameworks is shown to provide some of the same improvements as monetary integration, reducing the latter’s relative attractiveness.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund