n African Finance Journal - Southern African economic integration : evidence from an augmented gravity model
|Article Title||Southern African economic integration : evidence from an augmented gravity model|
|© Publisher:||AfricaGrowth Institute|
|Journal||African Finance Journal|
|Author||Moshi Optat Herman, Kirsten Wandschneider, Thierry Warin and Phanindra V. Wunnava|
|Publication Date||Jan 2011|
|Pages||1 - 13|
|Keyword(s)||Brown University, Endogenous optimum currency area theory, F1, F3, F4, Gravity model, IZA, Middlebury College, O24, O55, Occidental College, Optimum currency area and Southern African integration|
This paper investigates the feasibility of creating a common-currency union consisting of 16 countries in Southern Africa. We estimate an augmented-gravity model that includes public deficit, public debt, public expenditure, inflation, and the foreign reserves position. We also integrate Africa-specific variables such as existing economic blocs in the region, colonial heritage, and the convergence of living standards. Our analysis shows that the prospect for further integration in Southern Africa is promising, but many challenges still persist. The existing economic blocs can provide a first stepping stone to a larger currency union, but countries continuously have to cultivate good governance and fiscal discipline.
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