Monetary, financial and fiscal stability in the East African community: ready for a monetary union?

Research output: Contribution to journalArticlepeer-review

Authors

Colleges, School and Institutes

External organisations

  • LAPE, Université de Limoges, Limoges, France

Abstract

We examine prospects for a monetary union in the East African Community (EAC) by developing a stylised model of policymakers' decision problem that allows for uncertain benefits derived from monetary, financial and fiscal stability and then calibrating the model for the EAC for the period 2003–10. When policymakers properly allow for uncertainty, none of the countries wants to pursue a monetary union based on either monetary or financial stability grounds, and only Rwanda might favour it on fiscal stability grounds; we argue that robust institutional arrangements assuring substantial improvements in monetary, financial and fiscal stability are needed to compensate.

Details

Original languageEnglish
Pages (from-to)1179-1204
JournalWorld Economy
Volume38
Issue number8
Early online date6 Dec 2014
Publication statusPublished - Aug 2015

Keywords

  • monetary union, real option, financial stability, East African Community