Commonalities in the Movements of Inflation Rates among Countries in the East African Community

Abstract

In this study, we investigate the degree to which inflation-rate movements for countries in the East African Community (EAC) have become more similar, which is an important issue for the EAC’s goal of creating a common currency. For the five EAC countries (excluding South Sudan), we find that comovements in inflation rates generally became more similar between 1995 and 2018. A decrease in the correlations of the three largest EAC members with the rest of the EAC (from each of their perspectives) after 2013 is concerning for a smoothly running monetary union.