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Assessing Regional Integration in Africa III

Towards Monetary and Financial Integration in Africa

image of Assessing Regional Integration in Africa III

This report finds that although there are some successes, African countries are still experiencing enormous difficulties in achieving the macroeconomic convergence criteria set by their RECs, such as targets on inflation, debt-to-GDP ratio, and deficit-to-GDP ratio. The assessment also indicates that despite some financial developments, African financial market activities remain shallow, with capital markets characterized by low capitalization and liquidity. The report also provides policymakers with recommendations on how to deepen monetary and financial integration on the continent and create an enabling macroeconomic environment for the continent.

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The way forward

The focus of this chapter is to summarize the main findings of the report, the challenges and the way forward. Monetary and financial integration is an important step toward deeper economic integration. As indicated in previous chapters, there is ample empirical evidence in the literature to show that trade within a community and outside increases significantly when a regional bloc attains an advanced form of monetary cooperation (such as a common currency). Further more, the literature also shows that if a regional economic community is able to achieve a common market, then stronger monetary integration is needed to streng then that market. In addition, advanced form of monetary and financial cooperation improves overall economic performance and per capita output in participating countries.

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