Harriet Mugera

Monetary and Currency Unions: the European Monetary Union and the East African Community Harriet Mugera

The Optimal Currency Area (OCA) criteria has been considered to be rigid paving way for more accommodative criteria in determining whether it is opportune for countries to form or join monetary and currency unions. This book critically analyses the OCA, the convergence and shock analysis techniques to evaluate the attractiveness of monetary and currency unions. It then applies them to an already established monetary union, European Monetary Union (EMU) and the East African Community (EAC) that is in the process of institution. Can the EAC learn some lessons from EMU? Achieving a minimum degree of macroeconomic convergence between countries is a necessary condition for the establishment of monetary and currency unions. There could be higher ex-post benefits to a currency and monetary union, even though the conditions for an ex-ante common currency area have not fully been satisfied and seem to be costly. Adequate time is also needed in order to iron-out both political and economic divergences that exist among countries and create a more stable and constructive regional organisation.