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This paper investigates the feasibility of creating a common-currency union consisting of 16 countries in Southern Africa. We estimate an augmented-gravity model that includes public deficit, public debt, public expenditure, inflation, and the foreign reserves position. We also integrate Africa-specific variables such as existing economic blocs in the region, colonial heritage, and the convergence of living standards. Our analysis shows that the prospect for further integration in Southern Africa is promising, but many challenges still persist. The existing economic blocs can provide a first stepping stone to a larger currency union, but countries continuously have to cultivate good governance and fiscal discipline.

This paper describes the monetary policy response of countries during the inter-war period. How did central banks react to the Great Depression? How did countries balance the externals demands of the gold standard with domestic policy pressures? What was the optimal level of international policy coordination? We use weekly data over the period 1925-1936 to estimate central bank rate reaction functions for a panel of 22 countries during the inter-war gold standard. The estimates suggest to us changing objectives for monetary policy. Countries moved away from the sole objective of convertibility and towards a more ‘modern’ monetary policy based on exchange rate stabilization, but not yet output stabilization or even modern price level targeting. Importantly, this move to exchange rate stabilization was accompanied by the formation of monetary policy blocs around pre-existing economic relations. Countries’ interwar policy choices offer lessons for countries remaining in or choosing to join the European Monetary Union today.

We examine the first widespread use of capital controls in response to a global or regional financial crisis.\ud In particular, we analyze whether capital controls mitigated capital flight in the 1930s and assess their\ud causal effects on macroeconomic recovery from the Great Depression. We find evidence that they\ud stemmed gold outflows in the year following their imposition; however, time-shifted, difference-indifferences\ud (DD) estimates of industrial production, prices, and exports suggest that exchange controls did\ud not accelerate macroeconomic recovery relative to countries that went off gold and floated. Countries\ud imposing capital controls also appear to perform similar to the gold bloc countries once the latter group of\ud countries finally abandoned gold. Time series regressions further demonstrate that countries imposing\ud capital controls refrained from fully utilizing their newly acquired monetary policy autonomy. Even so,\ud capital controls remained in place as instruments for manipulating trade flows and for preserving foreign\ud exchange for the repayment of external debt.\ud