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Article Number - E41692E56400


Vol.9(22), pp. 752-761 , November 2015
DOI: 10.5897/AJBM2015.7803
ISSN: 1993-8233



Full Length Research Paper

Exchange rate dynamics and monetary unions in Africa: A fractional integration and cointegration analysis



Luis A. Gil-Alana
  • Luis A. Gil-Alana
  • University of Navarra, Faculty of Economics, Pamplona, Spain.
  • Google Scholar
Borja Balparda
  • Borja Balparda
  • University of Navarra, Faculty of Economics, Pamplona, Spain.
  • Google Scholar
Guglielmo Maria Caporale
  • Guglielmo Maria Caporale
  • Department of Economics and Finance, Brunel University, London, UB8 3PH, UK.
  • Google Scholar







 Received: 28 April 2015  Accepted: 28 September 2015  Published: 28 November 2015

Copyright © 2015 Author(s) retain the copyright of this article.
This article is published under the terms of the Creative Commons Attribution License 4.0


This paper uses fractional integration and cointegration techniques to analyze nominal exchange rate dynamics in three groups of African countries aiming to form currency unions in the near future. The proposed unions are the WAMZ (West African Monetary Zone), the EAC (East African Community), and the SADC (South African Development Community). The univariate results indicate that in all but three countries (Democratic Republic of Congo, Mauritius and Madagascar) the nominal exchange rate series exhibit a unit root. Concerning the multivariate results, for the WAMZ cointegration is only found in the case of Ghana with both Gambia and Guinea; for the EAC for Rwanda with Burundi, and Tanzania with both Rwanda and Uganda. Finally, for the SADC, cointegration is found in only 15 out of 66 cases, including Swaziland with South Africa, Zambia with Malawi, and Mozambique with both Lesotho and Tanzania. The policy implications of these findings are also discussed.

Key words: Monetary unions, Africa, exchange rates.

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APA Balparda, B., Caporale, G. M., & Gil-Alana, L. A. (2015). Exchange rate dynamics and monetary unions in Africa: A fractional integration and cointegration analysis. African Journal of Business Management, 9(22), 752-761.
Chicago Borja Balparda, Guglielmo Maria Caporale and Luis A. Gil-Alana. "Exchange rate dynamics and monetary unions in Africa: A fractional integration and cointegration analysis." African Journal of Business Management 9, no. 22 (2015): 752-761.
MLA Borja Balparda, Guglielmo Maria Caporale and Luis A. Gil-Alana. "Exchange rate dynamics and monetary unions in Africa: A fractional integration and cointegration analysis." African Journal of Business Management 9.22 (2015): 752-761.
   
DOI 10.5897/AJBM2015.7803
URL http://www.academicjournals.org/journal/AJBM/article-abstract/E41692E56400

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