African Monetary Unions - Dominated by the North? On the Relevance of Rational Economic Reasoning Under African Conditions

Kohnert, Dirk (2005): African Monetary Unions - Dominated by the North? On the Relevance of Rational Economic Reasoning Under African Conditions. Published in:

Abstract

ABSTRACT & RÉSUMÉ: - Monetary coordination is high on the agenda of different regional organizations in Africa. Economic benefits of a common currency, like lower transaction cost, increased macroeconomic stability, or the shielding of central banks against political pressure from nationalist elites and their inclination for excessive spending are undoubtedly expected. But the most important underlying aim of monetary integration in Africa is derived from its history, particularly the legacy of the slave trade and colonialism, and the subsequent strive for pan-African ideals, which has become manifest in the promotion of African unity in a crisis prone continent. However, whether it is feasible to achieve this ambitious political aim with economic means of regional economic and monetary cooperation, is open to question. Experts and the international donor community periodically caution about diverting attention from the most pressing needs of African countries by pursuing over-ambitious monetary policies. African governments should get the priorities right, i.e. they ought to implement first sustainable solutions to the problems of crisis resolution and prevention, the fight against corruption and rent-seeking elites, in order to promote good governance, transparency and accountability. The realities of African economies suggest that the grand new projects of monetary unions are unlikely to succeed. In addition, it is questionable whether economic, result-orientated reasoning and the discussion of monetary concepts (e.g. that of the Optimum Currency Area or of the Original Sin), which might be duly applied to Western or Latin American societies, have the same relevance in the African context.---------------------------------------------------------------------------------------------------------------------------------------------------------- RÉSUMé: [Les unions monétaires - dominé par le Nord? La zone CFA et l'AMC - Sur la pertinence du raisonnement économique rationnel dans des conditions africaines] - La coordination monétaire est élevé sur l'ordre du jour des différentes organisations régionales en Afrique. Les avantages économiques d'une monnaie commune, comme un moindre coût de la transaction, l'augmentation de la stabilité macroéconomique, ou le blindage des banques centrales contre la pression politique des élites nationalistes et leur penchant pour les dépenses excessives sont sans aucun doute attendus. Mais l'objectif sous-jacent le plus important de l'intégration monétaire en Afrique est dérivé de son histoire, en particulier l'héritage de la traite des esclaves et le colonialisme, et la subséquente lutte pour les idéaux panafricains, qui est devenu manifeste dans la promotion de l'unité africaine. Cependant, si il est possible d'atteindre cet objectif politique ambitieux avec des moyens économiques de la coopération économique et monétaire régionale, est ouvert à la question. Les experts et la communauté internationale des donateurs en garde périodiquement de détourner l'attention des besoins les plus pressants des pays africains en poursuivant trop ambitieux politiques monétaires. Les gouvernements africains devraient obtenir les bonnes priorités, à savoir qu'ils doivent mettre en œuvre des solutions durables aux problèmes de la résolution des crises, la lutte contre la corruption et la recherche de rente par les élites, afin de promouvoir la bonne gouvernance, la transparence et la reddition de comptes. Les réalités des économies africaines suggèrent que les grands nouveaux projets de unions monétaires ont peu de chances de réussir. En outre, il est douteux que, un raisonnement économiste orienté vers les résultat et la discussion des concepts monétaires (par exemple celle de la zone monétaire optimale ou du Péché Originel), ce qui pourrait être dûment appliqué aux sociétés occidentales ou d'Amérique latine, ont la même pertinence dans le contexte africain.

• Item Type: MPRA Paper
• Language: English
• Keywords: Sub-Saharan Africa, Franc CFA, CMA, optimal currency area, post-colonialism, France, South Africa, WAEMU,
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems ; Standards ; Regimes ; Government and the Monetary System ; Payment Systems; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; F - International Economics > F3 - International Finance > F33 - International Monetary Arrangements and Institutions; F - International Economics > F3 - International Finance > F35 - Foreign Aid; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F45 - Macroeconomic Issues of Monetary Unions; F - International Economics > F5 - International Relations, National Security, and International Political Economy > F54 - Colonialism ; Imperialism ; Postcolonialism; N - Economic History > N2 - Financial Markets and Institutions > N27 - Africa ; Oceania; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa; P - Economic Systems > P5 - Comparative Economic Systems > P51 - Comparative Analysis of Economic Systems; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z13 - Economic Sociology ; Economic Anthropology ; Social and Economic Stratification

References

(A) Publications on the Franc CFA zone

Debrun, Xavier / Masson, Paul / Pattilo, Catherine (2002): Monetary union in West Africa – Who might gain, who might lose, and why? IMF Working Paper, WP/02/226, IMF, Washington D. C.

Dembélé, Demba Moussa (2004): Abwertungsängste in Afrika (Anxieties about devaluation in Africa; in German). Le Monde Diplomatique (German edition, in: die tageszeitung (taz), June 2004, p. 17

Devarajan, Shantayanan (1997): Real Exchange Rate Misalignment in the CFA Zone. Journal of African Economics, (1997) 6: 35-53

Doré, Ousmane / Masson, Paul (2002): Experience with budgetary convergence in the WAEMU. IMF Working Paper, WP/02/108, IMF, Washington D.C.

Fielding, David (2002): The macroeconomics of monetary union – An analysis of the CFA Franc zone. Routledge, London

Glaser, Antoine / Smith, Stephen (1992/1997): Ces messieurs Afrique. Le Paris-village du continent noir. Paris, Vol. I-II, Calmann-Levy, 1992 (I), 1997(II)

Joly, Eva (2000): Notre affaire à tous. Paris, Editions les Arènes.

Hugon, Philippe (1998): “Les avatars de la Zone Franc face à l’Euro“, in: Cahier GEMDEV (Groupement d’Intérêt Scientifique pou l’Étude de la Mondialisation et du Développement), No. 25, pp.: 363-394

IMF (2003): West African Economic and Monetary Union - Recent Economic Developments and Understanding North-South and South-South Arrangements. Palgrave Macmillan, Houndmills, Basingstoke, Hampshire, 2005: 177-187;

Kohnert, Dirk (2005): Die UEMOA und die CFA-Zone. Eine neue Kooperations-Kultur im frankophonen Afrika? In: Nabers, Dirk et al. (eds.)(2005): Perspektiven regionaler Zusammenarbeit in den Entwicklungsländern, Deutsches Übersee Institut, Hamburg

Kohnert, Dirk (2004): Kooperation auf französisch : was die frankophone westafrikanische Wirtschaft (noch) zusammenhält. Der Überblick, 40 (März 2004) 1: 50-54

Masson, Paul R. / Catherine Pattillo (2002): Monetary union in West Africa: An agency of restraint for fiscal policies? Journal of African Economics.,11. 387 - 412

Masson, Paul R. / Catherine Pattillo (2001): Monetary union in West Africa (ECOWAS): is it desirable and how could it be achieved? IMF, Washington, DC, Occasional paper, no. 204

Monga, Célestin (1997): A Currency Reform Index for Western and Central Africa. World Economy, (January) 1997:103 – 125

Page, Sheila / Bilal, Sanoussi (2001): Regional integration in Western Africa. Report prepared for and financed by the Ministry of Foreign Affairs, the Netherlands, ODI, London, September 2001

Suchanek, Jan (2004): The CFA-Zone – A model for monetary coordination? Paper, presented at the workshop on New Issues in Regional Monetary Coordination – Understanding North-South and South-South Arrangements, Institute for Ibero-American Studies, Hamburg, July 7-9, 2004

Verschave, François-Xavier (1998): Françafrique. Paris, l’Harmattan

Verschave, François-Xavier (2000): Noire Silence. Paris, Les Arènes

Yates, Douglas (2000): Die Elf-Skandale: Eine Fallstudie von Elementen französischer Afrikapolitik unter dem Ancien Regime. In: Hofmeier, Rolf (Hrsg.): Afrika-Jahrbuch 1999. IAK / Leske & Budrich, Oppladen, 2000: 73-84

Yeats, Alexander J. (1989): Do African countries pay more for imports ? Yes. World Bank, Working Paper N° 265, Washington D.C

(B) Pulications on the CMA-Rand Zone, Southern Africa

Grandes, Martin (2004): Macroeconomic convergence in Southern Africa – The Rand Zone experience. OECD, Development Centre, Working Paper No. 231, DEV/DOC (2003)29, 15 Jan 2004-07-05

Jenkins, C. and Thomas, L. (1998): Is Southern Africa Ready for Regional Monetary Integration? in L. Petersson (ed): Post-Apartheid Southern Africa: Economic Challenges and Policies for the Future, Proceedings of the 16th Arrne Ryde Symposium, London, New York: Routledge,1998: 145-170

Metzger, Martina (2004): The Common Monetary Area in Southern Africa – A Typical South-South coordination effort? Paper, presented at the workshop on New Issues in Regional Monetary Coordination – Understanding North-South and South-South Arrangements, Institute for Ibero-American Studies, Hamburg, July 7-9, 2004

O’Meara, Dan (1996): Forty Lost Years - The National Party and the Politics of the South African State, 1948-1994. Randburg et Athens (Ohio), Ravan Press et Ohio University Press

Sparks, Donald L. (2002): The future of monetary integration in Southern Africa – Will the SADAC join the Rand Monetary Area? Paper presented at the conference “Exchange rates, economic integration and the international economy”, Ryerson University, Toronto

(C) General Publications & Africa

Barré, A. / Shearer, D. / Uvin, P. (1999) ‘The Limits and Scope for the Use of Development Assistance Incentives and Disincentives for Influencing Conflict Situations: Case-Study: Rwanda. Paris: OECD Development Assistance Committee Informal Task Force on Conflict Peace and Development Co-operation

Cadot, Olivier / Melo, Jaime de / Olarreaga, Marcelo (1999): Asymmetric regionalism in Sub-Saharan Africa – Where do we stand? CEPR Discussion Paper no. 2299, November 8, 1999

Damasio, Antonio R. (1994): Descartes' Error. Emotion, reason and the human brain. New York. (Quoted according to the German translation: Descartes' Irrtum. dtv, München 1997)

Edelman, G. M. (1992): Bright air, brilliant fire - On the matter of the mind. New York

Kohnert, Dirk (2004): Local Manifestations of Trans-national Troubles: Different Strategies of Curbing Witchcraft Violence in Times of Transition in South Africa. In: Ossenbrügge, Jürgen (ed.): Understanding North-South and South-South Arrangements, Palgrave Macmillan, Houndmills, Basingstoke, Hampshire, 2005: 177-187;

Reh, Mechthild (Eds.): Social Spaces of African Societies. Applications and Critique of Concepts of ‘Transnational Social Spaces’. Lit, Münster; 2004:151-54

Masson, Paul R. / Pattillo, Catherine (2004): The monetary geography of Africa. Brookings Inst. Press

Maxwell, Simon (2003): Heaven or Hubris: Reflections on the ‘New Poverty Agenda’. Development Policy Review, 21(1): 5-25

Oxfam (2002): Rigged rules and double standards – Trade, globalisation, and the fight against poverty. Make Trade Fair campaign, Oxfam, London

Storey, Andy (1999): The World Bank’s discursive construction of Rwanda – Poverty, inequality and the role of the state. LNC, www.cddc.vt.edu/host/lnc/papers/storey_rowanda.htm, accessed on 17 June 2004

UNCTAD (2004): Economic Development in Africa: Trade Performance and Commodity Dependence (UNCTAD/GDS/AFRICA/2003/1); released February 26, 2004

Uvin, Peter (1998): Aiding Violence: the Development Enterprise in Rwanda. West Hartford, CT: Kumarain