Capital Market Integration: Progress Ahead of the East African Community Monetary Union
IMF Working Papers, January 1, 2012
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- Capital Market Integration: Progress Ahead of the East African Community Monetary Union
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Bibliographic details
- Authors: Masafumi Yabara
- Published: January 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463931230.001
Summary and Context
- Author: Masafumi Yabara
- Publication date: January 1, 2012
- Key observation: Capital markets in the East African Community (EAC) face common challenges of low capitalization and liquidity, but to different degrees.
- Progress noted: EAC member countries have made noticeable progress in developing domestic capital markets through a regional approach, removing constraints on capital transactions and harmonizing market infrastructure.
- Empirical finding: Empirical analysis suggests capital market integration has not deepened during the past few years in the EAC, although convergence of investment returns is taking place to some extent.
Major Findings and Analytical Points
- Common challenges:
- Low capitalization of capital markets across EAC member countries.
- Low liquidity in EAC capital markets, with variation in severity across countries.
- Regional efforts and outcomes:
- Use of a regional approach to develop domestic capital markets.
- Removal of constraints on capital transactions.
- Harmonization of market infrastructure has occurred.
- Empirical analysis results:
- Capital market integration has not deepened during the past few years in the EAC.
- Some convergence of investment returns is evident to some extent.
Policy Recommendations and Proposed Actions
- Lessons drawn from comparative experience:
- Learning from the experience of the West African Economic and Monetary Union and the Association of Southeast Asian Nations.
- Four actions recommended to accelerate financial market integration:
- (i) further harmonize market infrastructure;
- (ii) strengthen regional surveillance mechanisms;
- (iii) encourage local currency bond issuance by multilateral financial institutions; and
- (iv) build the capacity of the existing regional institutions.
Subjects and Keywords
- Subject: Capital market integration, Capital markets, Economic integration, Financial institutions, Financial markets, Securities markets, Stock markets, Treasury bills and bonds
- Keywords: beta convergence, bond, capital market, Capital market integration, Capital markets, cointegration, debt, EAC capital market integration, EAC capital markets, EAC debt markets, EAC Treasury Bill, EAC treasury bill market, EAC treasury bond bond market, East African Community, equity, Global, market infrastructure, monetary union, regional integration, Securities markets, sigma convergence, stock, Stock markets, Sub-Saharan Africa, Treasury bills and bonds, West Africa, WP