The Road to Regional Integration in Africa: Macroeconomic Convergence and Performance in COMESA

COMESA (Common Market for Eastern and Southern Africa) aims at the establishment of a currency union in 2025. To this purpose, a policy harmonization program and a set of convergence criteria have been set up. A number of projects to foster trade, economic and financial integration have also been launched. Using timeseries econometrics, this paper provides evidence on some of the dimensions involved by such a process. Some highlights are as follows. The monetary policy stance mildly converges across countries; fiscal stabilization is instead still problematic in several member states. In spite of a low level of intra-regional trade, the economic fundamentals in a bulk of member states share a common stochastic trend; this suggests that shocks might be symmetric and hence business cycles synchronized. The implications is that countries might indeed benefit from deep forms of monetary integration. The distribution of income across countries in the region is highly unequal and there is no sign of convergence. In fact, the gap between poorer and richer countries appears to be widening. Against these results, some policy implications can be drawn concerning the design of transition towards monetary unity, mechanisms for self-financing of regional projects and compensation, removal of barriers to trade integration.