Cover

CONTENTS

OVERVIEW

CHAPTER 1. HOW SUSCEPTIBLE ARE THE EAC ECONOMIES TO ASYMMETRIC SHOCKS?

How Similar Are the EAC Economies?

Estimates of Idiosyncratic Shocks

Output Drops and Decelerations

Dispersion of Growth Rates among the EAC Countries

Clustering Based on Principal Component Analysis

CHAPTER 2. DOES THE EXCHANGE RATE CAUSE OR ABSORB SHOCKS IN THE EAC COUNTRIES?

The Extent of Exchange-Rate Management in EAC Countries

Methodology

Empirical Results

CHAPTER 3. RISK SHARING AND OTHER MECHANISMS TO MITIGATE THE IMPACT OF SHOCKS

Current Status

Experiences from Other Currency Unions

Policy Options

CHAPTER 4. CONCLUSIONS

BOXES

Box 1. Natural Resource Discoveries in the East African Community

FIGURES

Figure 1. Country Specific Growth Shocks

Figure 2. Growth Rate Dispersion in EAC Countries

Figure 3. Growth Correlations, 1990-2013

Figure 4. Clustering of Low-Income Countries in SSA: Principal Components Analysis

Figure 5. Exchange Rate Classification in EAC Countries

Figure 6. Response of the Exchange Rate to Supply and Demand Shocks in EAC

Figure 7. Variance Decomposition of Output, Price and the Exchange Rate

Figure 8. Response of Output and Price to Exchange-Rate Shocks in the EAC

TABLES

Table 1. EAC Stylized Facts

Table 2. Output Drops and Decelerations, 1990-2013

References

APPENDICES

Appendix I. Exchange Rate Classification Codes

Appendix II. Country Specifications in the SVAR

Appendix III. Impulse Response Functions

Appendix IV. Variance Decompositions