Monetary Integration in Africa: Is There a Business Cycles Synchronisation Between and Within Regional Economic Communities?

This paper focuses on business cycle synchronisation between Regional Economic Communities in Africa during the period 1980Q1-2016Q4. We consider a time series clustering analysis to evaluate whether the Regional Economic Communities (RECs) have similar patterns in business cycle comovements. The clustering analysis reveals five groups of countries that are relatively stable over time. Indeed, EAC is identified as a subgroup within SADC indicating that these two RECs could be merged to form a suitable monetary union in the foreseeable future. The dendogram indicates that more substantial discrepancies are observed in the clusters comparatively to the existing RECs. Finally, overlaps in membership of monetary integration may have an adverse impact on integration process in Africa. This results suggest that Africa is not ready for a common monetary union yet and it would be not surprising if the current time schedule envisaged for the launch of the single currency is postponed.