Exchange Rate Volatility and Optimum Currency Area: Evidence from Africa

Economics Bulletin, 2008, vol. 6, issue 12, 1-10

Abstract: In this paper we use a system of simultaneous equations and Generalized Method of Moment (GMM) to investigate the relation between bilateral exchange rate volatility and the relevant variables pointed out by the theory of optimum currency areas (OCA) for 21 selected African countries for the period 1990-2003. The evidence turns out to be strongly supported by the data. An OCA index for African countries is derived by adapting a method initially proposed by Bayoumi and Eichengreen (1997). The results have important policy implications for proposed monetary unions in Africa.

JEL-codes: F3 (search for similar items in EconPapers)
Date: 2008-03-26
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