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Monetary, financial and fiscal stability in the East African Community: ready for a monetary union?
The World Economy (2015)
  • Laetitia Lepetit
  • Clovis Rugemintwari
  • Frank Strobel, University of Birmingham
Abstract

We examine prospects for a monetary union in the East African Community (EAC) by developing a stylized model of policymakers' decision problem that allows for uncertain benefits derived from monetary, financial and fiscal stability, and then calibrating the model for the EAC for the period 2003-2010. When policymakers properly allow for uncertainty, none of the countries wants to pursue a monetary union based on either monetary or financial stability grounds, and only Rwanda might favor it on fiscal stability grounds; we argue that robust institutional arrangements assuring substantial improvements in monetary, financial and fiscal stability are needed to compensate.

Keywords
  • monetary union,
  • East African Community,
  • financial stability,
  • real option
Disciplines
Publication Date
2015
Citation Information
Laetitia Lepetit, Clovis Rugemintwari and Frank Strobel. "Monetary, financial and fiscal stability in the East African Community: ready for a monetary union?" The World Economy Vol. 38 Iss. 8 (2015)
Available at: http://works.bepress.com/frank_strobel/20/