A Greek wedding in SADC? - Testing for structural symmetry

Working paper 319
Author(s): 
Marthinus C. Breitenbach, Francis Kemegue and Mulatu F. Zerihun
Publication date: 
December, 2012
Journal: 
The African Finance Journal, Volume 16, Part 2, 2014
Classification-JEL: 

This paper investigates structural symmetry among SADC countries in order to establish, judged by modern OCA theory, which of these countries may possibly make for a good monetary matrimony and which countries may be left out in the cold. SADC remains adamant that it would conclude monetary union by 2018. It can ill afford a repeat of the type of financial and fiscal instability brought about by ex ante structural economic differences and asynchronous business cycles in the EU. This study contributes to the literature on macro-economic convergence in the SADC region. We make use of the Triples test to analyse each country’s business cycles for symmetry and then evaluate SADC countries’ ratio of relative intensity of co-movements in business cycles with co-SADC country and versus that of major trade partners. We find that not all countries in SADC conform to OCA criteria judged by both asymmetrical business cycles and weak co-movements in business cycles.

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