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PRICE FLEXIBILITY IN THE COMMON MONETARY AREA
Author(s) -
Matšaseng Kopano
Publication year - 2008
Publication title -
south african journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.502
H-Index - 31
eISSN - 1813-6982
pISSN - 0038-2280
DOI - 10.1111/j.1813-6982.2008.00180.x
Subject(s) - purchasing power parity , economics , unification , monetary economics , flexibility (engineering) , monetary policy , shock (circulatory) , international economics , member states , monetary hegemony , macroeconomics , european union , exchange rate , medicine , management , computer science , programming language
This paper examines the presence of flexibility within the common monetary area (CMA) as compared to a selected group of Southern African Development Co‐operation (SADC) countries. The study tests for the readiness of SADC countries towards macroeconomic convergence and monetary unification. The methods followed examine the concept of (relative) purchasing power parity and test for the speed of adjustment of prices after a shock. The results suggest that the level of price flexibility is high within the CMA as opposed to the control group. The implication is that the CMA arrangement has managed to foster price flexibility among its member countries. Furthermore, Botswana could be a potential candidate for a monetary union with the CMA group.