FEASIBILITY OF MONETARY UNION IN THE SADC AND THE EAC: ANALYSIS OF MACROECONOMIC CONVERGENCE CRITERIA

Year 2016, Volume: 8 Issue: 2, 255 - 272, 01.12.2016

E.H. Redda Paul Francois Muzindutsi

Abstract

In August 2003, the Association of African Central Bank Governors announced
that it would strive to establish a single currency and common central bank by
2021. Many regional trading blocs and economic communities in Africa are
working towards this objective. For example, the Southern African Development
Community (SADC) and the East African Community (EAC) are in the process of
introducing monetary union in their respective regions which will be implemented
in the near future. Such a decision is set to have wide-ranging economic
ramifications if a favourable economic environment does not exist on the ground.
The purpose of this paper is to analyse and assess the progress towards monetary
union in the SADC and EAC, using the macroeconomic convergence criteria of
the two economic regions in the envisaged time frame. This study used annual
data, from 1995 to 2015, to analyse the economic feasibility of monetary union in
the two African economic regions. Descriptive statistical analysis was employed
to assess the attainment of the macroeconomic convergence criteria. Based on the
finding, it is concluded that monetary union in both SADC and EAC is not
feasible, at least in the envisaged timeframe. There is lot to be done in a more
consistent and convincing fashion for a sustained period of time before the
implementation of monetary union.

Keywords

Monetary union, single currency, macroeconomic convergence criteria, SADC, EAC

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