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Are the East African Community's Countries Ready for a Common Currency?

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Listed:
  • Kigabo-Rusuhuzwa, Thomas

    (University of Rwanda)

  • Heshmati, Almas

    (Jönköping University)

Abstract

This paper investigates the East African Community (EAC) partner states' readiness for a common currency. It uses recent data to assess the impact of policy coordination in the region during the last seven years of East African Monetary Union's protocol implementation. Despite some similarities in the structures of EAC economies, EAC member states remain susceptible to asymmetric shocks. Inflation is in the process of converging in EAC, but the speed of convergence is slow. Time is needed for preparing and for harmonizing policy before adopting the common currency. Adopting a common currency will lead to considerable costs for EAC countries.

Suggested Citation

  • Kigabo-Rusuhuzwa, Thomas & Heshmati, Almas, 2022. "Are the East African Community's Countries Ready for a Common Currency?," IZA Discussion Papers 15210, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15210
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    More about this item

    Keywords

    East African Community; monetary union; common currency; policy harmonization; convergence; regional integration;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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