How ready is the East African community for monetary union? New evidence from an interest rate pass-through analysis

Bholla, Zohaib S; Aziakpono, Meshach J; Snowball, Jeanette D

Title: How ready is the East African community for monetary union? New evidence from an interest rate pass-through analysis
Creator: Bholla, Zohaib S
Creator: Aziakpono, Meshach J
Creator: Snowball, Jeanette D
Subject: To be catalogued
Date Issued: 2011
Date: 2011
Type: text
Type: article
Identifier: http://hdl.handle.net/10962/469720
Identifier: vital:77288
Identifier: https://hdl.handle.net/10520/EJC21519
Description: The five member countries of the East African Community (EAC), namely, Burundi, Kenya, Rwanda, Tanzania and Uganda have set the target of achieving a monetary union by 2012. The question that arises is: to what extent are they prepared for a monetary integration? Against this backdrop, this paper evaluates the current level of convergence amongst these East African countries by analysing whether the pass-through of monetary policy in the five countries has become similar over time. We use cointegration, error correction, and asymmetric error correction modelling frameworks and interest rate data over a ten year sample period, from 1999 to 2008, in the analysis. The results suggest that the degree of convergence amongst the countries remains low and that there are significant rigidities in the banking markets over time. While the pass-through of monetary policy has improved with respect to the banking loan markets, it has not done so in the deposit market. Overall the evidence suggests that implementing an EAC-wide monetary union will require more work to be done to stimulate the development of their financial systems and to harmonise their financial and monetary policies.
Format: 32 pages
Format: pdf
Language: English
Relation: Studies in Economics and Econometrics
Relation: Bholla, Z., Snowball, J. and Aziakpono, M.J., 2011. How ready is the East African community for monetary union? New evidence from an interest rate pass-through analysis. Studies in Economics and Econometrics, 35(2), pp.39-70
Relation: Studies in Economics and Econometrics volume 35 number 2 39 70 2011 2693-5198
Rights: Publisher
Rights: Use of this resource is governed by the terms and conditions of the Sabinet Terms and Conditions Statement (https://www.sabinet.co.za/terms-conditions)

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