Improving policy credibility: Is there a case for African monetary unions?

Dominique M. Guillaume, David Stasavage

Research output: Contribution to journalArticlepeer-review


This paper analyzes experience with monetary policy in Africa, focusing on countries that have participated in rule-based regional monetary agreements (CFA Zone, East African Currency Board and Rand Monetary Area). We show that African countries have generally lacked the political institutions necessary for governments to commit credibly on an individual basis to financial stability. We argue that monetary unions can provide an alternative means of credible commitment to sound macroeconomic policies, but only under certain conditions. First, exit from a union must be made costly by the existence of parallel regional agreements and/or links to the financial and technical assistance of industrial countries; second, governance structures of monetary unions must be designed so as to maximize chances for enforcement of monetary rules; and third, if a state seeks to break the rules of a union, other member governments must actively oppose such attempts. (C) 2000 Elsevier Science Ltd. All rights reserved.

Original languageEnglish (US)
Article number1044
Pages (from-to)1391-1407
Number of pages17
JournalWorld Development
Issue number8
StatePublished - 2000


  • Africa
  • Monetary and fiscal policy
  • Political economy
  • Regional integration
  • Rules and discretion

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Building and Construction
  • Development
  • Sociology and Political Science
  • Economics and Econometrics


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