This paper puts the intertemporal budget constraint approach to the current account in the Kenyan context. The study assesses the long-run tendencies of output and consumption with the objective of determining the sustainability of Kenya's external imbalance. Cointegrating regressions between net output and consumption are estimated, the results of which show that actual consumption trends may weaken Kenya's current account position. The exercise was repeated using data on exports and imports and the results confirm that long-term export growth has lagged behind long-term import growth indicating that Kenya's current account deficit may not be sustainable going forward.
This paper investigates structural symmetry among Southern African Development Community (SADC) in order to evaluate the potential for monetary union among member countries. In particular, we check for compliance with OCA criteria, with specific reference to business cycle synchronization. SADC can ill afford a repeat of the financial and fiscal instability in the EU, who was shown to have experienced ex-ante structural economic differences and asynchronous business cycles prior to monetary union. This study contributes to the literature on macro-economic convergence in the SADC region. We make use of the Triples test to analyse each country's business cycles for symmetry and then evaluate SADC countries' ratio of relative intensity of co-movements in business cycles with co-SADC country versus that of major trade partners. We find that not all countries in SADC conform to OCA criteria judged both by asymmetrical business cycles and weak co-movements in business cycles.
We analyze the effects of monetary policy on economic activity in the proposed African monetary unions. Findings broadly show that: (1) but for financial efficiency in the EAMZ, monetary policy variables affect output neither in the short-run nor in the long-term and; (2) with the exception of financial size that impacts inflation in the EAMZ in the short-term, monetary policy variables generally have no effect on prices in the short-run. The WAMZ may not use policy instruments to offset adverse shocks to output by pursuing either an expansionary or a contractionary policy, while the EAMZ can do with the 'financial allocation efficiency' instrument. Policy implications are discussed.
Although informal finance forms a large part of the financial sector in nearly all low income countries, official monetary data exclude informal transactions in these countries. Usually, informal finance data are nonexistent and occasionally, they are available only from surveys that often occur at irregular intervals and mostly with incomparable data. Using two survey datasets, indigenous knowledge, and elements of Friedman's data interpolation technique, this study constructs monthly time series of informal credit and interest rates for Malawi. The study argues that datasets constructed in this manner may be used with minimal loss of substance in place of the actual but nonexistent data.