Monetary Integration Initiatives in Eastern and Southern Africa (ESA): Sorting the Overlapping Membership^*

Abstract

Overlaps in membership of monetary integration initiatives in the Eastern and Southern Africa (ESA) region is a major stumbling block to deeper integration. For example, a strict implementation of the East African Community (EAC) customs union concluded in 2004 would violate existing Common Market for Eastern and Southern Africa (COMESA) and Southern Africa Development Community (SADC) free trade agreements. To resolve this problem the paper applies cluster analysis to assign countries to the most suitable monetary union initiative based on real and nominal convergence criteria. The results indicate that the ESA region is not converged enough for an ESA-wide monetary union. Instead two fairly distinct clusters, one in the southern cone around South Africa and the other around the EAC, are identified. This implies that a two-track monetary integration route is more appropriate for the region. The EAC is identified as a subgroup within COMESA, suggesting Tanzania should cede SADC membership for COMESA.Ã Acknowledgements: I wish to thank the editor (Benn Steil) and two anonymous referees for very constructive comments. All errors are mine.

The fear of exclusion and public support for a multilateral monetary union

“…1 The community currently is negotiating a common market targeted for implementation 2010. 2 The scanty literature available seems to suggest some potential for success, though the EAC region ex ante is clearly not an obvious OCA (see Buigut and Valev, 2005;Buigut, 2006). The endogeneity argument advocated in the currency union-trade literature summarised in Rose and Stanley (2005) may help improve the region's OCA status ex post.…”

A Literature Survey on Proposed African Monetary Unions

“…(2) The concern of overlapping membership upon the initiative of monetary integration in Eastern and Southern Africa (ESA) represents a major issue for enhanced regional integration . In an attempt to resolve the underlying concern, Buigut () has employed cluster analysis based on nominal and real catch‐up criteria. Corresponding convergence patterns do not confirm the case for an ESA‐wide currency union.…”

“…For instance, according to Buigut (), the strict implementation of a customs union by the EAC reached in 2004 is likely to breach existing free trade agreements for SADC and COMESA.…”

Anchoring to the Euro (and Grouped Together)? The Case of African Countries

“…Examples of such assessments are found in Masson and Pattillo (2001), Debrun, Masson and Pattillo (2003, 2010, Khamfula and Huizinga (2004), Bénassy-Quéré and Coupet (2005), Buigut andValev (2005, 2006), Buigut (2006), Yehoue (2006, Houssa (2008), Masson (2008), Tsangarides and Qureshi (2008), and Carmignani (2009). 10 In our analysis, we focus exclusively on the WAEMU and on the CAEMC and check whether they are optimal monetary unions, using data only for the recent period of their peg to the euro.…”