Improving Policy Credibility: Is There a Case for African Monetary Unions?

Posted: 11 Sep 2001

See all articles by Dominique M. Guillaume

Dominique M. Guillaume

Catholic University of Leuven

David Stasavage

New York University (NYU)


This paper analyzes experience with monetary policy in Africa, focusing on countries that have participated in rule-based regional monetary agreements (CFA Zone, East African Currency Board and Rand Monetary Area). We show that African countries have generally lacked the political institutions necessary for governments to commit credibly on an individual basis to financial stability. We argue that monetary unions can provide an alternative means of credible commitment to sound macroeconomic policies, but only under certain conditions. First, exit from a union must be made costly by the existence of parallel regional agreements and/or links to the financial and technical assistance of industrial countries; second, governance structures of monetary unions must be designed so as to maximize chances for enforcement of monetary rules; and third, if a state seeks to break the rules of a union, other member governments must actively oppose such attempts.

Keywords: regional integration, monetary and fiscal policy, political economy, rules and discretion, Africa

Suggested Citation

Guillaume, Dominique M. and Stasavage, David, Improving Policy Credibility: Is There a Case for African Monetary Unions?. World Development, Vol. 28, No. 8, August 2000. Available at SSRN:

Dominique M. Guillaume (Contact Author)

Catholic University of Leuven ( email )

Oude Markt 13
Center for Economic Studies
B-3000 Leuven
32 16 32 68 40 (Phone)
32 16 32 67 (Fax)

David Stasavage

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

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