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n African Finance Journal - A Greek wedding in SADC? Testing for structural symmetry towards SADC monetary integration

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Abstract

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.

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/content/finj/16/2/EJC162396
2014-01-01
2016-12-08
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