This paper examines how susceptible East African Community (EAC) economies are to asymmetric shocks, assesses the value of the exchange rate as a shock absorber for these countries, and reviews adjustment mechanisms that would help ensure a successful experience under a common currency. The report draws on analysis of recent experiences and examines likely future changes in the EAC economies.
The countries in the East African Community (EAC) are among the fastest growing economies in sub-Saharan Africa. The EAC countries are making significant progress toward financial integration, including harmonization of supervisory arrangements and practices and the modernization of monetary policy frameworks. This book focuses on regional integration in the EAC and argues that the establishment of a time table for the eliminating the sensitive-products list and establishing a supranational legal framework for resolving trade disputes are important reforms that should foster regional integration.
The East African Community (Burundi, Kenya, Rwanda, Tanzania and Uganda) has a goal of a currency union, as part of a movement toward eventual political union. A key factor in making a currency union desirable is a high level of business cycle synchronization (BCS) among member countries. In this paper we undertake a new approach to this topic with a recently developed set of tools. These tools have the advantage of yielding time-varying estimates, and, unlike previous metrics, allow us to gauge both differences of the phase of the business cycle between countries and differences in business cycle amplitude. We find BCS among the five countries does compare reasonable well with that found for euro zone nations before euro adoption. However, given the euros' difficulties, this is not strong evidence in favor of the desirability of a currency union. Moreover, Rwanda appears less well-suited, in terms of BCS, than the other four countries. In addition, all five nations have experienced sharp drops in BCS in recent years. Lastly, there has been no significant increase in BCS since the 2000 EAC Treaty, or the 2005 customs union. Overall, our results cast doubt on the desirability of an East African currency union.
The East African Community (EAC) has been among the fastest growing regions in sub-Saharan Africa in the past decade or so. Nonetheless, the recent growth path will not be enough to achieve middle-income status and substantial poverty reduction by the end of the decade—the ambition of most countries in the region. This paper builds on methodologies established in the growth literature to identify a group of countries that achieved growth accelerations and sustained growth to use as benchmarks to evaluate the prospects, and potential constraints, for EAC countries to translate their recent growth upturn into sustained high growth. We find that EAC countries compare favorably to the group of sustained growth countries—macroeconomic and government stability, favorable business climate, and strong institutions—but important differences remain. EAC countries have a smaller share of exports, lower degree of financial deepening, lower levels of domestic savings, higher reliance on donor aid, and limited physical infrastructure and human capital. Policy choices to address some of these shortcomings could make a difference in whether the EAC follows the path of sustained growth or follows other countries where growth upturns later fizzled out.
The ratification of the East African Community (EAC): the regional intergovernmental organization of the Republics of Kenya, Uganda, Tanzania, Rwanda and Burundi, in July 2000 calls for a close examination of the countries' economic policy decisions that affect the level and stability of prices, long-term interest rates, the fiscal position and the nominal exchange rates. The EAC countries established a Customs Union in 2005, a Common Market in 2010, and started negotiations towards a Monetary Union in 2011. This research work seeks to explore the question: "Are the five countries that comprise the EAC ready to form a Common Currency Area?" In light of the literature on common currency, this research looks at the trade relationships, economic structure, and the shocks affecting the East African Community in order to examine the feasibility of a Common Currency.
East African Community Law provides a comprehensive and open-access text book on EAC law. Written by leading experts, including the president of the EACJ, national judges, academics and practitioners, it provides the most complete overview to date of this increasingly important field. Uniquely, the book also provides a systematic comparison with EU law. EU companion chapters provide concise overviews of EU law and its development, offering valuable inspiration for the application and further development of EAC law. The book has been written for all practitioners, judges, civil servants, academics and students faced with questions of EAC law. It discusses institutional, substantive and jurisdictional issues, including the nature of EAC law, free movement and competition law as well as the reception of EAC law in Partner States.
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.
This paper assesses the extent of economic and financial integration among the East African Community (EAC) along a number of dimensions and, where possible, whether integration has increased in the wake of the major regional integration policy milestones.
Do changes in monetary policy affect inflation and output in the East African Community (EAC)? We find that (i) Monetary Transmission Mechanism (MTM) tends to be generally weak when using standard statistical inferences, but somewhat strong when using non-standard inference methods; (ii) when MTM is present, the precise transmission channels and their importance differ across countries; and (iii) reserve money and the policy rate, two frequently used instruments of monetary policy, sometimes move in directions that exert offsetting expansionary and contractionary effects on inflation—posing challenges to harmonization of monetary policies across the EAC and transition to a future East African Monetary Union. The paper offers some suggestions for strengthening the MTM in the EAC.
