Feasibility of the Proposed Monetary Union in East African Community: Generalized  Method of Moments Approach

Richard Kiplangat Siele

Authors

Richard Kiplangat Siele

Keywords:

feasibility, monetary union, theory of optimum currency area, convergence criteria, general method of moments, Kenya

Abstract

This study examined the suitability of Theory of Optimum Currency as a basis for feasibility of proposed monetary union in East African Community (EAC) countries; Uganda, Burundi, Kenya, Rwanda and Tanzania. The study sought to determine symmetry of; monetary shocks; inflation rates; fiscal deficit, public debt, real Gross Domestic Product (GDP) and degree of openness. Exploratory was used employing panel data covering 2000Q1-2016Q4. Generalized Method of Moments approach was utilized. Results showed convergence in the real exchange rate was statistically significant and negative implying formation of a monetary union reduced combined GDP. Policy makers in EAC countries could concentrate in adapting unfulfilled macroeconomic convergence criteria and strengthening cooperation in monetary policy co-ordinations.

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How to Cite

Feasibility of the Proposed Monetary Union in East African Community: Generalized Method of Moments Approach. (2018). Global Journal of Human-Social Science, 18(E5), 19-27. https://socialscienceresearch.org/index.php/GJHSS/article/view/2566

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