The Prospect of the Proposed Currency Union on Intra-Regional Trade: Southern African Customs Union
The Prospect of the Proposed Currency Union on Intra-Regional Trade: Southern African Customs Union

Summary/Abstract: Formal currency union with a common policy is welfare superlative to formal currency union due to relatively greater transparency. The study evaluates whether adopting a common currency will lead to trade. Additionally, the study estimates whether countries are under trading or overtrading to investigate whether there exists trade potential. The results show there exists greater trade potential due to geographic and economic fundamentals therefore adopting a common currency will lead to trade. Also, the study showed that the financial markets served as a buffer for the volatility of the currencies notably the Rand. The study concludes that a currency union with a common policy could serve as a panacea when the appropriate institutional policy framework is adopted to reduce trade and non-trade barriers.

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