Monetary, Financial and Fiscal Stability in the East African Community: Ready for a Monetary Union?

Laetitia Lepetit (1) , Clovis Rugemintwari (1) , Frank Strobel (2)

1 LAPE - Laboratoire d'Analyse et de Prospective Economique
2 University of Birmingham [Birmingham]

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.

Domaines: Sciences de l'Homme et Société; Economies et finances

Laetitia Lepetit, Clovis Rugemintwari, Frank Strobel. Monetary, Financial and Fiscal Stability in the East African Community: Ready for a Monetary Union?. 2012. ⟨hal-00916699⟩