Will the Euro Trigger More Monetary Unions in Africa?

The authors analyze the prospects for greater monetary integration in Africa, in the wake of the European Monetary Union. They argue that the structural characteristics of African economies, are quite different from those of European economies, but that much can be gained from monetary cooperation - as an external agency of restraint, and for promoting stability in the financial sector. But one should not expect too much from such arrangements. There is little evidence of contagious attacks on African currencies requiring the coordination of exchange rate policies. And economies of scale in the prudential regulation of financial systems, could be achieved through international cooperation without the need for a common currency. The same is true of enhanced risk-pooling through the financial system. The European Monetary Union has only a marginal impact on the net benefits of monetary cooperation, but the euro would be a natural anchor for any African monetary union - especially if the United Kingdom, and the sterling were to join the European Monetary Union. Indeed, the most likely route to new monetary cooperation in Africa, is through a common peg to the euro.

Bibliographic Details

Main Authors:	Honohan, Patrick, Lane, Philip R.
Language:	en_US
Published:	World Bank, Washington, DC 2000-07
Subjects:	administrative costs, balance sheet, balance sheets, bank insolvency, bank lending, Bank of England, bank regulation, bank reserves, bank supervision, banking crisis, banking sector, banking system, banking systems, banks, Banque de France, borrowing, capital flows, Central Bank, central banking, central banks, commercial banks, competitiveness, contagion, convertibility, creditor, currency, currency boards, currency unions, depositors, deposits, devaluation, diversification, economic growth, economic integration, economics, EMU, Euro, exchange controls, exchange rate, exchange rate policies, exchange rate policy, exchange rate stability, exchange rate variability, exchange rates, external debt, external shocks, externalities, financial authorities, financial crisis, financial factors, financial intermediaries, financial markets, financial systems, fiscal authorities, fiscal deficits, fiscal discipline, fiscal policies, fiscal pressure, fiscal pressures, fiscal restraint, fixed exchange rate, foreign banks, formal sector, French francs, government debt, growth rates, hard currency, illiquidity, import substitution, inflation, inflation rates, insolvent banks, interbank markets, interdependence, interest rates, international investment, international payments, lender of last resort, liquidity, local currencies, local currency, macroeconomic stability, monetary authority, monetary cooperation, monetary financing, monetary integration, monetary policy, monetary regimes, monetary system, monetary systems, monetary union, monetary unions, nominal exchange rate, nominal interest rates, operating expenses, payments arrears, pooling, portfolios, prudential regulation, public debt, public enterprises, public sector, real exchange rate, recession, reserves, securities, seigniorage, shareholders, South African rand, speculative attacks, stock markets, terms of trade, trading, transport, treasury, volatility, vulnerability, working capital, eurocurrency markets, financial stability, economies of scale, prudential regulations, international cooperation, pound sterling,
Online Access:	https://hdl.handle.net/10986/21403
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