
Contents
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6.1 Introduction 6.1 Introduction
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6.2 Monetary Unions: Simply Underperforming or Structurally Flawed? 6.2 Monetary Unions: Simply Underperforming or Structurally Flawed?
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6.2.1 High and low expectations 6.2.1 High and low expectations
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6.2.2 Analytics of the standards of living: the pre-eminent role of the real exchange rate 6.2.2 Analytics of the standards of living: the pre-eminent role of the real exchange rate
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6.2.3 The tragic burden of overvalued exchange rates 6.2.3 The tragic burden of overvalued exchange rates
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6.3 How Monetary Unions Prevented Potential Trade Dividends 6.3 How Monetary Unions Prevented Potential Trade Dividends
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6.4 Macroeconomic Masochism: Some Painful Lessons 6.4 Macroeconomic Masochism: Some Painful Lessons
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6.4.1 An illusory strategy for tackling the balance of payments deficit 6.4.1 An illusory strategy for tackling the balance of payments deficit
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6.4.2 From deflationary policies to devaluation 6.4.2 From deflationary policies to devaluation
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6.5 Back to Basics: on the Validity of African Monetary Unions 6.5 Back to Basics: on the Validity of African Monetary Unions
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6.5.1 Validity of the optimum currency areas argument 6.5.1 Validity of the optimum currency areas argument
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6.5.2 Validity of the public finance argument 6.5.2 Validity of the public finance argument
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6.5.2.1 Lack of coordination 6.5.2.1 Lack of coordination
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6.5.2.2 The seigniorage issue 6.5.2.2 The seigniorage issue
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6.6 Conclusion 6.6 Conclusion
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References References
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6 African Monetary Unions: An Obituary
Get accessCélestin Monga, PhD, is Senior Economic Adviser/Director at the World Bank Group and Visiting Professor of Economics at the University of Paris 1 Panthéon-Sorbonne (France) and Peking University (China). He has held various board and senior executive positions in academia, financial services, and international development institutions, serving most recently as Vice-President and Chief Economist of the African Development Bank Group and Managing Director at the United Nations Industrial Development Organization (UNIDO). He previously served on the Board of Directors of the Sloan School of Management’s Fellows Program at the Massachusetts Institute of Technology (MIT), and taught economics at Boston University and the University of Bordeaux. He also worked with the Banque Nationale de Paris Group as Department Head and Branch Manager at the BICEC Bank in Cameroon. Dr. Monga has published extensively on various dimensions of economic and political development. His books have been translated into several languages and are widely used as teaching tools in academic institutions around the world. His most recent works include The Oxford Handbook of Structural Transformation (2019), with J. Y. Lin; Beating the Odds: Jump-Starting Developing Countries (Princeton University Press, 2017), with J. Y. Lin; the two-volume Oxford Handbook of Africa and Economics (2015), with J. Y. Lin; and Nihilism and Negritude: Ways of Living in Africa (Harvard University Press, 2016). Dr. Monga holds graduate degrees from MIT, Harvard University, and the Universities of Paris and Pau.
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Published:06 January 2015
Cite
Abstract
This chapter discusses the experience of African countries with monetary unions, focusing on the CFA Zone where that experience has been the longest and the deepest history of integration. It briefly discusses how the intellectual legacy of colonialism led to distorted expectations and the neglect of the exchange rate—a crucial tool for improving the standards of living in open economies. It then provides the analytical framework for understanding why trade reforms did not yield positive results in the fixed exchange rate environment. The chapter also draws some lessons from that macroeconomics of masochism, which consists in pegging the exchange rate of small, poor economies to a strong currency. Finally, it reexamines the criteria for assessing the validity of monetary unions regardless of whether they peg their currency or not.
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