ECS3703
Assignment 2
(ANSWERS)
Semester 2
2023
ADMIN
[COMPANY NAME]
, Question 1 [25] Suppose the Sub-Saharan African region intends to adopt a
common currency for its member countries as it would be economically
beneficial for the participants (nations). (a) What is this arrangement
called……………………….…………………… (2) (b) In your view, would the
Sub-Saharan African region have any chance of benefiting from this kind of
arrangement, and why?.................................(10) (c) Discuss the risks and
benefits associated with the adoption of a common
currency……………………….…….…….…………………….……………. (13)
This arrangement is called a "currency union."
(b) Whether the Sub-Saharan African region would benefit from a currency union
depends on several factors. Here are some key considerations:
1. Economic Integration: The success of a currency union often depends on the level of
economic integration among member countries. If Sub-Saharan African countries have
significant trade and economic ties, a common currency could streamline transactions,
reduce exchange rate risks, and encourage greater economic cooperation. However, if
these ties are weak, adopting a common currency might not provide significant
benefits.
2. Economic Convergence: For a currency union to work effectively, participating
countries should have similar economic conditions and policies. If there are large
disparities in inflation rates, fiscal policies, or economic structures among member
states, it could lead to imbalances and conflicts within the union.
3. Monetary Policy Control: Member countries would relinquish control over their
individual monetary policies when joining a currency union. They would need to adhere
to a common monetary policy set by a central authority. If countries have differing
economic needs, this can be a challenge. For Sub-Saharan African nations, it's essential
to assess whether they are willing to cede this control and whether the common
monetary policy is suitable for their diverse economies.
4. Benefits of a Common Currency: A common currency can eliminate currency
exchange costs, promote price transparency, and encourage foreign investment. It can
also enhance the region's collective bargaining power in international trade
negotiations. Whether these benefits outweigh the drawbacks depends on the specific
circumstances of the Sub-Saharan African countries involved.
(c) Risks and benefits associated with the adoption of a common currency in the Sub-
Saharan African region:
Benefits:
Assignment 2
(ANSWERS)
Semester 2
2023
ADMIN
[COMPANY NAME]
, Question 1 [25] Suppose the Sub-Saharan African region intends to adopt a
common currency for its member countries as it would be economically
beneficial for the participants (nations). (a) What is this arrangement
called……………………….…………………… (2) (b) In your view, would the
Sub-Saharan African region have any chance of benefiting from this kind of
arrangement, and why?.................................(10) (c) Discuss the risks and
benefits associated with the adoption of a common
currency……………………….…….…….…………………….……………. (13)
This arrangement is called a "currency union."
(b) Whether the Sub-Saharan African region would benefit from a currency union
depends on several factors. Here are some key considerations:
1. Economic Integration: The success of a currency union often depends on the level of
economic integration among member countries. If Sub-Saharan African countries have
significant trade and economic ties, a common currency could streamline transactions,
reduce exchange rate risks, and encourage greater economic cooperation. However, if
these ties are weak, adopting a common currency might not provide significant
benefits.
2. Economic Convergence: For a currency union to work effectively, participating
countries should have similar economic conditions and policies. If there are large
disparities in inflation rates, fiscal policies, or economic structures among member
states, it could lead to imbalances and conflicts within the union.
3. Monetary Policy Control: Member countries would relinquish control over their
individual monetary policies when joining a currency union. They would need to adhere
to a common monetary policy set by a central authority. If countries have differing
economic needs, this can be a challenge. For Sub-Saharan African nations, it's essential
to assess whether they are willing to cede this control and whether the common
monetary policy is suitable for their diverse economies.
4. Benefits of a Common Currency: A common currency can eliminate currency
exchange costs, promote price transparency, and encourage foreign investment. It can
also enhance the region's collective bargaining power in international trade
negotiations. Whether these benefits outweigh the drawbacks depends on the specific
circumstances of the Sub-Saharan African countries involved.
(c) Risks and benefits associated with the adoption of a common currency in the Sub-
Saharan African region:
Benefits:
