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

ByPaulo Drummond, Ari Aisen, Emre Alper, Ejona Fuli, Sébastien Walker

July 20, 2015

Disclaimer: The views expressed herein are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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.

Subject: Currencies, Economic integration, Economic theory, Exchange rate arrangements, Exchange rates, Foreign exchange, Monetary unions, Money, Supply shocks

Keywords: Currencies, demand shock, DP, DPPP, EAC country, EAC economy, East Africa, Exch. rate, Exchange rate arrangements, Exchange rates, interest rate, monetary union, Monetary unions, partner state, Sub-Saharan Africa, Supply shocks, West Africa

Pages:
58
Volume:
2015
DOI:
https://doi.org/10.5089/9781513562179.087
Issue:
008
Series:
Departmental Paper No. 2015/008
Stock No:
TMUEACEA
ISBN:
9781513562179
ISSN:
2616-5333

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