The Convergence of Macroeconomic Variables within the East Africa Community
Michael Oloo *
School of Economics, University of Nairobi, Nairobi, Kenya.
Mary Mbithi
School of Economics, University of Nairobi, Nairobi, Kenya.
Martine Oleche
School of Economics, University of Nairobi, Nairobi, Kenya.
*Author to whom correspondence should be addressed.
Abstract
This study seeks to establish whether the East African Countries are realizing convergence in their macroeconomic policies as efforts are geared towards the establishment of an economic union and subsequently a monetary union in a bid to foster economic growth in the region. Five EACs were included in the analysis using panel data for the period 2008-2018. The methodology employed in the analysis involved; sigma convergence, beta convergence using fixed-effect model, and finally stochastic convergence was tested. The findings show that there is no evidence of macroeconomic convergence and the less developed countries are neither catching up with the relatively developed countries. The macroeconomic variables are also not showing a tendency to be moving the same direction as time goes by. Therefore, for the EACs to realize a common union, either economic or monetary, they need to formulate policies that will ensure that the member states adhere to the desired macroeconomic policies that would lead the region to convergence.
Keywords: Macroeconomic variables, macroeconomic policies, monetary union.