Macroeconomic and monetary convergence in selected regional integration groupings

Abstract

Several African Regional Economic Communities (RECs) pursue deep forms of monetary and macroeconomic integration, such as the establishment of a system of fixed exchange rates, the formation of a monetary union, or even the creation of full economic communities. This process of deep integration is expected to generate substantial micro- and macro-economic benefits for the countries involved. The relevant literature points to both efficiency and dynamic gains. The increased stability of exchange rates and the reduced degree of economic uncertainty will favour the integration of goods and capital markets and the exploitation of economies of scale. At the same time, the more stable macroeconomic environment will stimulate investments, financial development and private sector activities, thus contributing to the growth potential of Member States. The purpose of the report is to provide systematic empirical evidence on how countries in different African RECs tend to perform along the three forms of convergence above mentioned. The methodological approach is based on the analysis of time-series data using statistical and econometric procedures.