Closer Monetary Union and Product Market Integration in Emerging Economies: Evidence from the Common Monetary Area in Southern Africa

Journal Article
Published on 1 March 2018


This study by Nchake, Edwards and Rankin (2017), published in the International Review of Economics and Finance, utilizes detailed micro price data to estimate the impact of closer monetary union on the integration of product markets across countries, considering two policy shocks from Botswana. Using a difference-in-difference approach, the results reveal that the adoption by Botswana of a crawling peg exchange policy reduced price differences between South Africa and Botswana by 4 percentage points. Subsequent changes in the Botswana monetary policy regime further reduced price gaps by 2 percentage points. These results provide support for the effectiveness of alignment in interest rate and exchange rate policies in enhancing the integration of product markets between countries.


Mamello Nchake

University of Cape Town

Lawrence Edwards

University of Cape Town

Neil Rankin

Stellenbosch University