Research Information System
Thesis Type: Doctorate
Institution Of The Thesis: Erciyes University, Sosyal Bilimler Enstitüsü, Turkey
Approval Date: 2020
Thesis Language: English
Student: AWENG PETER MAJOK GARANG
Supervisor: Hatice Erkekoğlu
Abstract:
This thesis focuses on three interrelated empirical themes with major emphasis on the dynamics around the proposed East African Monetary Union. The first empirical analysis examines the drivers of convergence in Africa, noting with interest, the various convergences clusters formed and the club memberships of East African countries. The study accounts for individual heterogeneity and transition paths using sophisticated econometric method (݈ ݃ݐ ݐ݁ݐݏሻ and panel data models to examine convergence clubs and analyze the drivers of convergence in Africa. The results establish four core convergence clubs and highlight the importance of initial conditions, human capital and institutions in convergence processes. Thus, the study provides insights into the adoption of differentiated development policies consistent with specific conditions of African countries, with an integrational agenda driven by accelerated levels of human capital and technological progress especially in East Africa. The second topic explores the prospects of the proposed East African Monetary Union (EAMU) by analyzing business cycles synchronization, structural cross-correlations, spectral decomposition, and regional clusters. The findings firstly, show that cyclical movements reflect various idiosyncratic, common, historical and external shocks in the region. Secondly, all countries appear to be structurally correlated with each other except for South Sudan and Burundi. The results also observe that the contemporaneous comovements between the East African Community (EAC) cycles with those of Kenya and Tanzania are procyclical with coincidental path shift while the same EAC cycles appear to be acyclical with those of Burundi. Additionally, from the spectral decomposition, Kenyan cycles take 10 years to complete while those of Tanzania and Rwanda take 8 years. Ugandan and Burundian cycles take approximately 5 years while the cyclical vii frequency for South Sudan corresponds to 3.3 years. Finally, the cluster characterization of countries reveals that South Sudan, Burundi, and Rwanda form a group while Kenya, Uganda and Tanzania form a group distinct from the rest. The need to prioritize policies on regional risk-sharing and adjustment mechanisms and establish a credible institutional infrastructure that ensures surveillance and enforcement of convergence conditions adopted in the EAMU protocol is emphasized. The final empirical theme focuses on the monetary transmission mechanisms (MTMs) as an integral issue in studying the feasibility of the proposed East African Monetary Union. Specially, it’s examined how composite and idiosyncratic shocks are transmitted across a panel of East African countries and how smaller countries respond to shocks originating from Kenya (the largest economy in the region) using the Panel Structural Vector Autoregressive (PSVAR) method. The findings reveal that in the panel short run: (i) The contemporaneous response of interest rate to output gap shock is positive, (ii) the immediate response of inflation rate to output gap shock is negative, and (iii) the response of inflation rate to interest rate shock is negative. The panel long run estimations exhibit that: (i) Response of exchange rate to output gap shock is negative, (ii) the response of inflation rate to output gap shock is negative, (iii) the response of interest rate to exchange rate shock is positive, (iv) the response of inflation rate to exchange rate shock is negative, and (v) the response of inflation rate to interest rate shock is negative. Additionally, (a) it’s shown that structural shock in exchange rate of Kenya does not seem to have considerable impact on panel output gap, (b) a structural shock in the exchange rate of Kenya influences positively the panel interest rate, and negatively the panel inflation rate, and (c) panel output gap responds negatively to one standard positive structural shock in interest rate of Kenya.
Key Words: Convergence, Convergence Clubs, Structural Correlations, Business Cycles
Synchronization, Transmission of Shocks, East Africa Monetary Union.