This Plot Shows The Biggest Challenge for Welfare-Boosting Single African Currency

This Plot Shows The Biggest Challenge for Welfare-Boosting Single African Currency

This plot shows why a single African currency under a supranational bank will be nearly impossible to improve the welfare of Africans. There is no banker in the world that can design a welfare-boosting monetary policy in such a heterogeneous market as shown in the image. By looking at the export nexus, what Nigeria needs is orthogonal to the needs of Rwanda, and yet you want them to be driven by a common monetary policy. Scale that to 30 divergent shocks, you have multiple-whammy paralyses.

One of the biggest challenges the monetary union which African Union plans to implement in the continent will be lack of flexibility to use monetary policies to drive economic agenda for respective member states. In other words, if a supranational bank which will become the central bank of the member states takes over, monetary policy tools cannot be deployed to fix some economic situations at member country level.

Source: the African
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4 thoughts on “This Plot Shows The Biggest Challenge for Welfare-Boosting Single African Currency

  1. But the proponents of single currency may be receiving and reading a different memo, so not likely to see the weakness and inadequacies of their proposed agenda.

    Personally, I am never a fan of continental wide monetary policy or governance system, same way my independence of mind is not up for negotiation.

    The sovereignty of nations must be respected, of course trade deals can be struck at multiparty levels, but allowing another entity to make decisions that ordinarily should be exclusive reserve of yours amounts to abdication, which I do not think it’s a virtue.

    Globalisation the way we shout it presently will collapse in the near future, once citizens cannot point at the benefits derived from very complex unions agreed without their consents.

    The earth is never flat or round, sometimes protectionist posturing could be your only route to survival; never fall for everything you are told!

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