Editorial Director
Managing Editor
  N° 107    
Issue 3 2006
New Monetary Unions in Africa: a Major Change in the Monetary Landscape?
Paul R. Masson  
Africa has important initiatives to build regional currency areas and ultimately a single African currency. Calculations using a calibrated model show that the proposed monetary unions are unlikely to yield net economic benefits for all countries, suggesting that all-inclusive monetary unions are not incentive-compatible—even if trade doubles as a result of sharing a currency. Central banks are assumed not to be immune from pressures to finance governments. While a monetary union will to some extent dilute the influence of individual governments, countries that exhibit fiscal discipline would not want to join a monetary union with others that do not. Given the heterogeneity across countries, monetary unions could be selectively expanded but not encompass all countries in a region. Abstract

Full Text
Currency Unions; African Trade; Fiscal Discipline Keywords
E58; E61; E62; F33 JEL classification
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