Assessing Inflation Convergence in the East African Community

Abstract

The paper investigates inflation convergence in five East African countries: Burundi, Kenya, Rwanda, Tanzania and Uganda, as they aspire to form a monetary union by 2024 under the umbrella of the East African Community (EAC). We find that inflation differentials in the five EAC countries are not persistent, implying that inflation rates in these countries have been converging. This convergence can be attributed to a similarity in terms of the nature of shocks affecting EAC countries as well as the crucial role of foreign factors as drivers of inflation in these countries since the early 1990s. © 2018 John Wiley & Sons, Ltd.

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

“…Another aspect that has been recently analyzed is the inflation convergence in EAC (Dridi and Nguyen, 2018;Kishor and Ssozi, 2010). These two papers support inflation convergence in EAC.…”

“…The first study uses a set of panel unit root tests and a global vector autoregression based on data covering the period January 2000 to February 2015 while the second uses an unobserved component model in additional to panel unit root tests with data covering the period March 1981 to January 2009. The two papers support inflation convergence in EAC and conclude that convergence can be explained by domestic factors and by a larger role of foreign factors (Dridi and Nguyen, 2018).…”

“…Another aspect that has been recently analyzed is inflation convergence in EAC (Dridi and Nguyen, 2018;Kishor and Ssozi, 2010). The first study uses a set of panel unit root tests and a global vector autoregression based on data covering the period January 2000 to February 2015 while the second uses an unobserved component model in additional to panel unit root tests with data covering the period March 1981 to January 2009.…”

The Convergence of Macroeconomic Variables within the East Africa Community

“…Dridi and Nguyen [29] examined inflation convergence in five East African Nations and in particular, the study focused on Rwanda, Uganda, Tanzania, Burundi, and Kenya. The paper studied convergence in inflation using Global Vector Autoregressive (GVAR).…”

Inflation convergence and the determinant factors: A case study on 31 provinces in Indonesia

“…The differences in inflation could be due to regional heterogeneities in the relative productivity growth of the tradeable versus the non-tradeable sectors (Balassa-Samuelson effect) (Dridi & Nguyen, 2019). The original Balassa-Samuelson model assumes that the economy consists of the tradable (T) and the non-tradable (NT) sectors, differing with respect to productivity growth (biased towards the tradable sector) (Konopczak & Welfe, 2017).…”