Monetary and Financial Systems in Africa: Integration and Economic Performance

✍ Scribed by Aloysius Ajab Amin (editor), Regina Nsang Tawah (editor), Augustin Ntembe (editor)

• Publisher: Palgrave Macmillan
• Year: 2022
• Tongue: English
• Leaves: 449
• Category: Library

✦ Synopsis

This book provides an overview of the monetary and financial systems seen in Africa. The issues related to these systems are examined to help evaluate their effectiveness in fostering the development of African economies. Economic integration is extensively discussed to highlight variations between different parts of Africa and the specific challenges seen within certain regions. The impact of monetary unions, in particular the CFA franc zone, on economic activities is also explored.

This book aims to outline how sustainable development can be achieved in Africa through well-developed financial and monetary institutions and policies. It will be relevant to students, academics and policy makers interested in African and development economics.

✦ Table of Contents

Foreword
Preface
Contents
Contributors
Abbreviations
List of Figures
List of Tables
Part I: Introduction
Chapter 1: Introduction and Background: A Historical Perspective of the Role of Financial Institutions in Africa’s Development
Introduction
Components of Monetary and Financial System
Market-Based and Bank-Based Financial Systems
Diversified Financial System
Channels of Transmission
The Economy
Importance of African Resources
Goal of Development
Lessons from Indian Case Study
Poverty Reduction and Development
Financial Constraint
Conclusion with Policy Implication
A Synopsis of the Rest of the Book
In Part II, with Three Chapters, the Authors Discuss Monetary Policy, Focusing on Inflation Targeting and Monetary Policy Transmission Mechanism to the Real Sector
Part III, in Seven Chapters, Analyzes Regional Issues Related to Regional Financial Systems and Integration
Part IV Is in Six Chapters Covering Continental Monetary Issues and Economic Performance
Appendix 1 Cryptocurrency Market with Central Bank Digital Currency and Potential Regulations Aloysius Ajab Amin
Introduction
Cryptocurrency
Central Bank Digital Currency
Benefits and Risks
Synchronized Infrastructure
Legal Framework
References
References
Part II: Country Monetary Policy Issues
Chapter 2: Monetary Policy and Price Stability in Ghana’s Fourth Republic: Have the Dues Been Paid?
Introduction
Monetary Policy Frameworks Since 1993
Price Stability Performance Under the Monetary Policy Frameworks
Economic Growth Under the Fourth Republic
Economic Growth, Income Distribution, Unemployment, and Welfare
Conclusion and Policy Recommendations
References
Chapter 3: Monetary Policy Impact on Macroeconomic Performance in Tanzania: Empirical Approach
Introduction
Monetary Policy Transmission to Real Variables: Insights from the Literature
Monetary Policy and Economic Performance in Tanzania
Methodology
Data and Empirical Results
Data Source and Definitions
Empirical Results
Long-Run Relationship
Impulse Response Functions
Forecast Error Variance Decomposition
Conclusion
References
Chapter 4: Effects of Monetary Policy Transmission on Economic Growth in Sierra Leone
Introduction
Review of Previous Studies
Evidence from Sierra Leone
Methodology
Regression Results
Conclusion and Recommendations
References
Part III: Regional Financial Sector Issues
Chapter 5: The Monetary Union and Economic Integration: Challenges of the Creation of the West African Single Currency, Eco
Introduction
Recent Economic Situation of ECOWAS
Declining Economic Growth Is Dependent on Fluctuations in the Global Economic Environment and Socio- Political Instability: Therefore Is Exposed to External Shocks
An Economic Environment Under Heavy Inflationary Pressures
A Slight Recovery in Public Finances Is Tempered by a Continuous Increase in Debt, a Persistent Deficit in the Balance of Payments, and Significant Depreciation of National Currencies
The West African Monetary Cooperation Program (ECOWAS)
Context and History of Monetary Cooperation in West Africa: Colonial Monetary Arrangements and the West African Clearing House (WACH)
The ECOWAS Monetary Cooperation Program (EMCP)
The Issues and Challenges of the ECOWAS Monetary Cooperation Program (EMCP)
Macroeconomic Convergence
The Intensification of the Process of Macroeconomic Convergence and the Adoption of a So-Called Fast-Track Approach for the Implementation of the EMCP
The Challenges of the ECOWAS Monetary Cooperation Program
Perspectives and New Developments of the ECOWAS Monetary Cooperation Program
Adoption of the Roadmap for the Creation of the Single Currency of ECOWAS
The Establishment of the Presidential Task-Force
Overall Situation and Performance in Terms of Economic Policy Harmonization and Macroeconomic Convergence in ECOWAS
Performance in Harmonizing Economic Policies and Institutional Arrangements
Performance in Terms of Macroeconomic Convergence in ECOWAS
A Deterioration in the Macroeconomic Convergence Profile of ECOWAS with a Downward Trend in the Number of Countries That Meet All the Criteria
Convergence Tests: An Analysis of Cyclical Convergence (or Convergence of Economic Policies) and Structural Convergence (or Convergence of Economic Structures) in ECOWAS
Presentation of the Model
Analysis of the Results of Empirical Tests of Economic Convergence in ECOWAS
The Cost-Benefit Analysis of Joining the ECOWAS Monetary Union (Eco Zone)
The Advantages of Joining the Monetary Union
The Costs of Joining the Monetary Union
Conclusion and Recommendations of Economic Policies
References
Chapter 6: The Political Economy of a Monetary Union in ECOWAS: The Case of the ECO Currency
Introduction
Politics and Interest Group Influence
Brief History of Eco Currency
France-Afrique Relationship
Division and Distrust Amongst the ECOWAS Member States
Way Forward for ECOWAS Monetary Integration
Francophone CFAF ECOWAS Member States Negotiate an Exit Agreements from the CFAF with France
ECOWAS Negotiate an Exit Agreement with France on Behave of the Whole Region
A Piecemeal Approach
Conclusion
References
Chapter 7: The Effects of Minimum Bank Capital and Governance on the Financing of the EMCCA Economies
Introduction
Literature Review
Empirical Strategy and Data
Results
Data Description
Results of Econometric Estimations
Concluding Remarks
Appendixes
Appendix 7.1: Variance Breakdown on TEG
Appendix 7.2: Breakdown of the Structure with Regard to Credits
Appendix 7.3: Breakdown of the CMB Variance on Credits Given to Economic Agents in Need of Financing
References
Chapter 8: Facts and Prospects of Monetary Union in East Africa
Introduction
The Evolution of the East African Cooperation
The Genesis of a Common Currency in East Africa
The Renaissance of the East African Monetary Union
The Convergence Criteria and the Success of Monetary Unions
The Structural Attributes in East African Community and the Success of a Monetary Union
Can Optimal Currency Area Be Feasible for the East African Community?
Interest Rates, Inflation, and Investment in East Africa
Fiscal Deficits, Debt, and Exchange Rate Volatility
Monetary Institutions in East Africa
Interregional Trade in East Africa
Conclusion
References
Chapter 9: The Development Cost of Maintaining Price and Economic Stability in Central and West African CFA Franc Zone
Introduction
France and Francophone Africa
Evolution of CFA Franc: The BEAC and BCEAO
Changes in CFA Franc Exchange Rates and Devaluation
Origin of the Banking System, Operation Account, and Trade
The CFA Franc Introduction
The Operating Principles of CFA Franc
CFA Franc Zone Foreign Exchange Reserves in French Operation Account
The Euro and CFA Franc Process
European Union (EU) and European Central Bank: No Obligation!
Economic Costs to CFA Franc Countries
Monetary Policy in the CFA Franc Zone Countries
Credit Facilities for Investment and Business Growth with Entrepreneurship
Trade-in Manufactured and Agricultural Goods
Optimum Currency Area (OCA)
Adjustment: The CFA Franc and Economic Performance of the Zone
Primary Producers and Trade
Business and Investment Environment
Infrastructural Development
Conclusion
References
Chapter 10: Banking Development in West Africa
Introduction
An Overview of Banking Evolution in West Africa
Commercial Banking in West Africa
Central Banking in West Africa
A Review of Previous Studies
Methodology
Data
Empirical Model
Empirical Results
Hausman Specification Test
Regression Results
Discussion
Conclusion
References
Chapter 11: Capital Markets Development and Economic Growth in North Africa
Introduction
Macroeconomic Performance of the North African Economies
Algerian Financial Development
Financial Market Development in North Africa
Market Breadth-Listed companies
Market Liquidity
Evolution of Traded Stocks
Capital Market and Economic Growth: Empirical Evidence
Empirical Results
Conclusion and Policy Implications
References
Part IV: Continental Monetary Policy and the Financial Systems
Chapter 12: Economic Performance Across Monetary Unions in Africa
Introduction
Theoretical and Empirical Literature on Effect of Monetary Unions on Economies
Empirical Literature
The State of Integration as a Pathway to Monetary Unions in Africa
Country Comparisons of Integration Across Africa
The Levels of RECS Economic and Monetary Integration
Macroeconomic Integration
Financial and Monetary Integration
Evidence of Economic Performance Across Monetary Unions in Africa
Trends in Economic Growth Performance
Patterns GDP and GDP Per Capita Among Regional Economies
Performance of Exports and Imports a Percentage of GDP
Trends in Net FDI Inflows Among the Economies
Performance in Human Development Indicators Among the Regions
Challenges in Regional and Monetary Integration
Conclusions and Policy Suggestions
References
Chapter 13: Capital Markets’ Development: Are African Countries Lagging?
Introduction
Literature Review: Financial Development and Economic Growth
Economic Performance of African Countries (1990–2019)
Capital Markets Development in African Countries
Stock Markets
Bond Markets
Growth: Financial Development Relationship
Conclusion
References
Chapter 14: African Monetary Unions and Competitiveness
Introduction
Literature Review
Conceptual Issues
Theoretical Review
Methodological Review
Empirical Review
Methodology and Data
Comparative Evaluation of Performances of Monetary Unions
Brief Background on the CFA Monetary Zone and the European Monetary Union
Analysis and Discussion
Technological Development
Conclusion
References
Chapter 15: Financial Institutions Versus Trade and Infrastructural Development in Africa
Introduction
Financing of International Trade
Status of Trade Finance in Africa and Other Challenges to Trade
Financial Institutions and Infrastructural Development in Africa
Models for Financing Infrastructure
Private Financing of Infrastructure in Africa
National Development Banks and Infrastructure Development in Africa
Resource Financed Infrastructure
Public-Private Partnerships
Blended Finance
Status of Financing Infrastructure Development in Africa
Conclusion and Policy Implications
References
Chapter 16: Prospect of Economic Unions on Intra-regional Trade in Africa
Introduction
Literature Review
Methodology
Data Type and Source
Specification of Model
Definition of Variables and Expected Signs
Estimation Technique and Empirical Application
Analysis and Discussions
Trend Analysis of Intra-Regional Trade and Exchange Rate Volatility on the ECOWAS Sub-Region
Descriptive Statistics
Results for Currency Union Effect on Trade
Results for Trade Creation-Trade Diversion
Results for Trade Potential in the ECOWAS Sub-Region
Empirical Results and Interpretation for the SACU
Descriptive Statistics
Trend Analysis of Intra-Regional Trade and Exchange Rate Volatility on the SACU Sub-Region
Results for the Proposed Common Currency on Trade
Results for Trade Potential in the SACU
Conclusions and Recommendations
References
Chapter 17: A Single Currency for Africa: Challenges and Possibilities
Introduction
Historical Background
African Economic Community Treaty
Is Africa an Optimum Currency Area? A Theoretical Perspective
Can African Economies Converge?
Benefits of a Single African Currency
Costs of Monetary Integration in Africa
Africa’s Single Currency Strategy
Measuring Regional Integration in Africa
Summary and Conclusion
References
Part V: Conclusion: The Way Forward
Chapter 18: Conclusion: Currency Regimes and Monetary Integration in Africa, the Way Forward
Introduction
Monetary Policies Across Africa
Financial Institutions
Monetary and Economic Integration
Trade, Competitiveness and Monetary Integration
Continental Monetary and Financial Pillars
Conclusion
References
Correction to: Prospect of Economic Unions on Intra-regional Trade in Africa
Correction to:
Index