Southern African Economic Integration: Evidence from an Augmented Gravity Model

17 Pages Posted: 4 Aug 2009

See all articles by Thierry Warin

Thierry Warin

HEC Montreal; CIRANO

Phani V. Wunnava

Middlebury College; Institute for the Study of Labor (IZA)

Optat Tengia

Brown University

Kirsten Wandschneider

Occidental College

Abstract

This paper investigates the feasibility of creating a common-currency union consisting of 16 countries in Southern Africa. We estimate an augmented-gravity model that includes public deficit, public debt, public expenditure, inflation, and the foreign reserves position. We also integrate Africa-specific variables such as existing economic blocs in the region, colonial heritage, and the convergence of living standards. Our analysis shows that the prospect for further integration in Southern Africa is promising, but many challenges still persist. The existing economic blocs can provide a first stepping stone to a larger currency union, but countries continuously have to cultivate good governance and fiscal discipline.

Keywords: optimum currency area, gravity model, Southern African integration, endogenous optimum currency area theory

JEL Classification: F1, F3, F4, O24, O55

Suggested Citation

Warin, Thierry and Wunnava, Phani V. and Tengia, Optat and Wandschneider, Kirsten, Southern African Economic Integration: Evidence from an Augmented Gravity Model. IZA Discussion Paper No. 4316. Available at SSRN: https://ssrn.com/abstract=1442611

Thierry Warin (Contact Author)

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H2X 2L3
Canada

CIRANO ( email )

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

HOME PAGE: http://works.bepress.com/warin/

Phani V. Wunnava

Middlebury College ( email )

Middlebury, VT 05753
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Optat Tengia

Brown University ( email )

Box 1860
Providence, RI 02912
United States

Kirsten Wandschneider

Occidental College ( email )

1600 Campus Rd
Los Angeles, CA 90041
United States

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