Toward a Monetary Union in the East African Community: Asymmetric Shocks, Exchange Rates, and Risk-Sharing Mechanisms

Author: Mr. Paulo Drummond, Mr. Ari Aisen, Mr. Emre Alper, Ms. Ejona Fuli, and Mr. Sébastien Walker

An exploration of three specific macroeconomic challenges facing the East African Community economies.

Volume/Issue: Volume 2015 Issue 008

Publication date: July 2015

ISBN: 9781513562179

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Topics covered in this book

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Exports and Imports , Money and Monetary Policy , DPPP , DP , EAC country , interest rate , demand shock , monetary union , EAC economy , Exch , rate , partner state , Exchange rates , Monetary unions , Exchange rate arrangements , Currencies , Supply shocks , West Africa , East Africa , Sub-Saharan Africa

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Summary

This paper examines how susceptible East African Community (EAC) economies are to asymmetric shocks, assesses the value of the exchange rate as a shock absorber for these countries, and reviews adjustment mechanisms that would help ensure a successful experience under a common currency. The report draws on analysis of recent experiences and examines likely future changes in the EAC economies.