This thesis asks the question, is there economic justification for two CARICOM countries forming a currency union? There is a theoretical component consisting of a dynamic stochastic general equilibrium (DSGE) model, and an empirical component utilizing vector autoregressions and cointegration analyses. More specifically, the reactions of two, small, open economies, to symmetric and asymmetric shocks, with and without a currency union, are investigated. Secondly, the demand and supply shocks between country pairs are examined to determine whether positive correlations exist. Thirdly, the thesis looks at the issue of economic convergence, especially given the coordinated efforts of CARICOM member states towards an environment conducive for a currency union. The theoretical results support the traditional view that countries with symmetric shocks are better candidates for a currency union, while those with asymmetric shocks are not. The empirical work supports the formation of currency unions for the following country pairs, Grenada-St. Kitts, Grenada-St. Vincent, Trinidad-Grenada, and Trinidad-St. Vincent. / Economics

The dissertation assesses the suitability of countries in the Eastern and Southern Africa region for a monetary union. Using VAR techniques the symmetry of the underlying structural shocks is analyzed. The results indicate that supply and demand shocks are generally asymmetric, which does not lend strong support for forming a region-wide currency union at the moment. Although economic shocks are not highly correlated across the entire region, we tentatively identify three sub-regional clusters of countries that may benefit from a currency union. We find some tentative evidence that some, though not all, sub-regions may benefit from a link to the Euro. However, the speed and magnitude of adjustment to shocks is similar across the countries. Therefore, further integration of the economies might lead to more favorable conditions for a monetary union. Using a Barro-Gordon type model, it is shown that forming a monetary union yields net benefits if output shocks are similar across member countries and if one or more countries in the union can serve as anchors. In addition it is shown that the opportunistic objectives of one country’s policymakers are kept in check at the union level by other members with disparate objectives. Hence monetary union can improve the monetary policy for its members if the pressures on the individual central banks are dissimilar. Calibrating the model to evaluate the proposed monetary union in the East African Community, it is found that central bank uncertainty would be a significant aspect in the net welfare effect of monetary union. An examination of the EAC countries also shows a fair degree of linkages. Intra-regional trade is substantial. The benefits from reduced transaction costs and exchange rate uncertainty would be substantial and growing. Though symmetry of shocks is still low, implementation of a protocol on factor mobility under discussion would help improve labor mobility. However though some progress has been made there is still need for more convergence before monetary union could be implemented.

The objective of this thesis is to evaluate the readiness of SADC economies to complete the process of monetary integration in the region and to form a monetary union and adopt a common currency. This is done against the backdrop of optimal currency area (OCA) theory. Given this objective, the study hypothesizes that the majority of SADC economies in the region are potential candidates to bring the proposed monetary union into existence sometime in the future, if not in 2018 as proposed by SADC secretariat. The study uses a mix of different methodologies ranging from developing a conceptual framework to empirical investigation in order to answer the research questions and to test the hypotheses. In addition to theoretical reviews and discussions, four findings emerge as fundamental from the four essays. First, from the Triples test the study has not found significant evidence to reject the null hypothesis of „structural symmetry‟ among ten SADC member countries. 10 out of 15 members (i.e.66.67 percent) have exhibited structural symmetry in their real business cycles over the study period. However, close to 50 percent of the member states have weak cyclical co-movements with a low relative intensity. Taking the experience of the EMU where just five countries are able to create havoc in the entire union, we can safely say that the findings from the combined three tests from the first essay confirm that there is still work that needs to be done to coordinate economic policies in the region to improve real economic integration before entry into the proposed monetary union in 2018. In Essay 2, the study finds that the generalised purchasing power parity (GPPP) hypothesis holds for SADC economies given the stationary panel of RER series with one cointegrating relationship as exhibited by trace statistics and the existence of a long run co-integrating relationship amongst the system of real exchange rates. This implies that there is potential for relative prices to converge in the region in the long run, hence SADC is a potential OCA, based on the criteria of price convergence. However, the slow speed of adjustment towards GPPP long run equilibrium should be a warning for the possible ineffectiveness of policy to defend these countries against external shocks. In Essay 3, the Brock, Dechert, and Scheinkman (BDS) test and Fourier approximation confirm the non linear nature of real exchange series in SADC economies. This finding further supports an OCA in the region comprising those countries included in the study. The findings in this essay further strengthen the findings from the previous two essays that claim that member states could constitute a monetary union in the region at some future date. Lastly, the fourth essay, using a long run dynamic panel model finds that there are common policy variables determining the real exchange rate (RER)/ the real effective exchange rate (REER) series of SADC economies. The RER/REER equilibrium analysis reveals that SADC economies are characterised by persistent misalignment. This calls for further policy coordination and policy harmonisation in the region. By considering findings from all the four essays the study finds that nine SADC countries can potentially constitute SADC-OCA namely; Botswana, Madagascar, Malawi, Mozambique, Seychelles, South Africa, Swaziland, Tanzania and Zambia. Angola and Mauritius disqualified from a SADC-OCA at least for the sample period considered in this study. Lesotho, DRC, and Zimbabwe are not included due to data limitations, otherwise Lesotho could join the qualifying group of countries given long experience with the Common Monetary Area (CMA). To reap benefits SADC economic integration initiatives, it requires realistic time span, political will, common understandings and awareness, commitment and self-disciplined policy actions from member states and their fellow citizens. / Thesis (PhD)--University of Pretoria, 2014. / tm2015 / Economics / PhD / Unrestricted

The thesis focuses on theoretical and empirical analysis of the deterioration of price perception among European consumers after the introduction of the euro banknotes and coins. The aim of the thesis is to find out the major factors which provoked a rapid increase of the indicator of perceived inflation after 2002, while inflation in euro zone continued developing moderately, and to derive some conclusions for economic policy of candidate countries to euro introduction. There are at least four reasons why it matters to analyse the distortion of the indicator of perceived inflation from the HICP index which measures the inflation in the euro zone. Firstly, from the political and economical perspective there is a risk of weak support for the European monetary integration. Secondly, the distortion of price perception can deteriorate the belief in the official statistics. Thirdly, the inaccurate price perception can lead to wrong consumer decisions having an impact on a volume or a structure of national consumption. Last but not least, there is a risk of a negative impact on price expectations. In order to meet its goals, the thesis stases several hypotheses which analyse the problem from two perspectives. Firstly, from a mere review of detailed prices in the period of the introduction of the euro banknotes and coins (Hypotheses: (i) the consumers are more sensitive towards some price movements, therefore the deterioration of the indicator of perceived inflation can be explained by the abnormal evolution of some prices in the critical period of the euro introduction, (ii) convergence of the new euro prices towards round prices lead to frequent price movements having an impact on price perception) Secondly, from the point of view of limited perception of prices by consumers (Hypothesis: (iii) consumers does not behave rationally when deciding about prices therefore they are not able to perceive all price movements). The thesis is organized in three chapters. The first chapter is mainly theoretical and introduces the problem of perceived inflation. It is followed by two chapters which combine empirical and theoretical analysis of the drivers of perceived inflation after the euro introduction. Within its conclusions, the thesis identifies a combination of several factors that caused a rapid increase of the indicator of perceived inflation after the changeover which have their origins in a changed monetary environment. The effects coming from using rounded conversion rates instead of the official ones in mental conversions of the new euro prices to the old prices in national currencies, limited the possibility for consumers to perceive correctly the price movements. Moreover, higher sensitivity towards price increases in comparison to price decreases and a higher inflation in some areas led to blaming the new currency for high inflation. The irrational behaviour of consumers in relation to prices was strengthened by the effects of the new currency. The thesis also states that while the increase of the indicator of perceived inflation had no negative impact on inflation expectations, the deterioration of inflation perception might negatively influence consumption.

Student Number : 0414488P - MA research report - School of Social Sciences - Faculty of Humanities / This study aims at highlighting the politics of international cooperation with respect to monetary integration in West Africa. Monetary integration was envisaged in the Economic Community of West African States (ECOWAS) when the organization was formed in 1975. Two decades after its formation, it was realized by member states that limited success had been achieved as far as the objectives of the organization were concerned. As a result, the ECOWAS Treaty was revised and significant decisions were made in 1993, and the call for a monetary union was reiterated. Factors which could have worked against the formation of a monetary union prior to 1993 changed in favour of monetary cooperation. The adoption of the Euro in the European Union and more especially by France, weakened the symbolic link of the CFA Franc zone to France, and to an extent reduced the French stigma, which had hitherto discouraged Anglophone countries from participating in an expanded monetary union with their Francophone counterparts. The democratic transition of Nigeria and the accession to power of a new leader who has shown commitment to regional integration, improved cooperation arrangements among ECOWAS states in working towards the formalization of a monetary union. The transformation from the Organization of African Unity (OAU) to the African Union (AU) and its strategy of creating a common African currency as well as the emergence of the New Partnership for Africa’s Development (NEPAD) provided extra motivations for African states to show more commitment towards integration. Based on the above factors, several positive steps have been taken towards the formalization of a monetary union in the community. The West African Monetary Zone (WAMZ) was realized in 2000 and more importantly, the West African Monetary Institute (WAMI) was created and started operating in the same year. The Institute was created to prepare the groundwork for the creation of the West African Central Bank. The above mentioned factors increased the prospects of forming a monetary union in the community but several challenges still remain. First there is the problem of the asymmetric nature of the economies in the region. Secondly, political instability is a major factor that militates against the formation of such a union. Domestic political instability in Nigeria, which is heightened by ethnic and religious differences as well as the asymmetric nature of her economy in relation to those of other states in the region, makes it difficult for a monetary union to revolve around her. This research project is centered on Treaties, statistical analysis, theories and concepts and literature from economic and financial institutions. We conclude by stating that the analysis here reflects the situation on the ground and provide lessons to member states of the community, prospects for monetary integration would be further improved if member states work coherently to overcome such challenges.

The goal of this diploma thesis is to assess the suitability and readiness of the Slovak Republic to adopt a single European currency. In analyzing the costs and benefits relating to Slovakia?s accession to the EMU, this thesis is guided by the theory of the OCA. The thesis provides a survey of the OCA theory, attempts to measure some of the OCA indicators and calculate OCA index for Slovakia. The results suggest that Slovakia fulfils the necessary condition for joining the monetary union, i.e. it is relatively well aligned with the euro area. The diploma thesis concludes that Slovakia is relatively suitable and well-prepared to join the euro area in 2009.

The goal of this diploma thesis is to assess the suitability and readiness of the Slovak Republic to adopt a single European currency. In analyzing the costs and benefits relating to Slovakia?s accession to the EMU, this thesis is guided by the theory of the OCA. The thesis provides a survey of the OCA theory, attempts to measure some of the OCA indicators and calculate OCA index for Slovakia. The results suggest that Slovakia fulfils the necessary condition for joining the monetary union, i.e. it is relatively well aligned with the euro area. The diploma thesis concludes that Slovakia is relatively suitable and well-prepared to join the euro area in 2009.

The present dissertation focuses on the impact of the adoption of common European currency on trade of the eurozone countries. There have been several studies published on the subject of the possible euro's pro-trade impact on economies of the first eurozone participants, most of those studies use sample periods prior to 2003. This thesis contributes to the literature by adding six more years of eurozone data to 2011, capturing two further enlargements of the European Union and four eurozone expansions. The results of the models estimate the effect of common currency on trade to be insignificant. On the other hand, membership in the European Union proved to have significant and important trade enhancing effect of 13 % - 25 %.

Doctoral dissertation thesis deals with the issue of monetary integration within Europe. There are three main parts of it: the first one describes historical, political and also economic aspects of gradual monetary union formation, the second one analyses the impact of financial and economic crisis on the symmetry of Euro area development, and the last one deals with present debt crisis (and EU reaction on it). There are also involved possible future developments, when fiscal policy councils gained the most attention.

No / This book explores economic developments across Europe in relation to its apparent segmentation, as disparities widen between core and periphery countries. In contrast to previous literature, the scope of analysis is extended to Europe as a continent rather than confining it solely to the European Union, thereby providing the reader with greater insight into the core/periphery nexus. The authors commence with a critical appraisal of economic thinking in relation to regional trade agreements and monetary integration. In relation to a number of EU economies, the book addresses issues of a liquidity trap, deflation, and twin deficits, together with the interconnection between exchange rates and current account balances. Importantly, they extend the discussion of segmentation through a series of focused case studies on Russia, Brexit and emergence of the mega-regionals.