Currency substitution, macroeconomic interdependence and real exchange rate fluctuations in selected African countries

In the past decade, good prospects of integration in Africa have re-ignited a debate that started in the 1960s when the first wave of African countries became independent. The key question at the center of this debate is the following: Can Africa pursue and successfully carry out any economic integration project? Considering a group of carefully selected African countries, our dissertation attempts to provide some elements of answer by first exploring how some economic phenomenon, like currency substitution, can hinder the continent's march towards the achievement of such a challenging goal. Then, we shed light on the co-movements of some fundamental macroeconomic variables to establish the chances of success of this economic integration project. At last, we end up our research by trying to single out and comprehend the causes of fluctuations in real exchange rates.;The first Chapter asks a basic question regarding whether or not integration in Africa is a myth. The three types of integration are discussed and each one is weighted to determine how appropriate it could be to the peculiar case Africa.;Chapter two investigates the phenomenon of currency substitution in selected African countries and its consequences for the stability of real money demand functions in these countries. Indeed, instability in real money demand function could jeopardize the viability of any macroeconomic policy—monetary or fiscal—destined to promoting development and alleviating poverty. Any prospects of integration will make little sense if development and poverty reduction cannot be achieved.;This leads our discussion into the third Chapter where we assess macro-economic interdependence in the largest economies of Africa by focusing our attention on six fundamental macroeconomic variables. We search for the existence of common trends and common cycles among these economies.;Chapter four examines the real exchange rates along with the factors that cause their fluctuations in the long-run. The importance of this latter chapter comes from the fact that exchange rates play and will increasingly play an instrumental role for African economies as they are more and more engaging in international trade. At last, Chapter 5 makes concluding remarks about our work.