Currency Unions in Africa: Is the Trade Effect Substantial Enough to Justify Their Formation?

15 Pages Posted: 4 Apr 2008

Abstract

Using estimates that currency unions double trade, we quantify the welfare effects of forming currency unions for the African regional economic communities and for the African Union as a whole. The potential increase in trade is shown to be small, and much less than that resulting from the adoption of the euro. Allowing for increased African trade does not overturn the negative assessment of African currency unions, due to asymmetries in countries terms-of-trade shocks and their degree of fiscal discipline.

Suggested Citation

Masson, Paul R., Currency Unions in Africa: Is the Trade Effect Substantial Enough to Justify Their Formation?. World Economy, Vol. 31, Issue 4, pp. 533-547, April 2008, Available at SSRN: https://ssrn.com/abstract=1116412 or http://dx.doi.org/10.1111/j.1467-9701.2007.01028.x

Paul R. Masson (Contact Author)

C.D. Howe Institute

67 Yonge St., Suite 300
Toronto, Ontario M5E 1J8
Canada

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