Acta Universitatis Danubius. Œconomica, Vol 15, No 5 (2019)

Abstract

The study empirically tested if the macroeconomic variables of the 26 member countries of the Tripartite Free Trade Area are converging or not over the 15 year period. ­Convergence is important because it indicates if the countries are moving towards a similar level of development and wealth and business cycles are becoming synchronised. The paper does not employ the traditional method of testing for absolute and conditional convergence but rather uses the macroeconomic variables identified under the ‘convergence criteria’ by the three regional economic communities (COMESA, EAC, SADC) which make up the TFTA. The study observed evidence of relatively strong forms of convergence of macroeconomic variables across the TFTA member countries. However, as expected, the evidence is scattered because it was detected in the majority but not all economies or sub-periods. Nonetheless, the paper acknowledges the progress made by the member countries over the 15 year period in stabilising key macroeconomic variables especially inflation and service debt. Although cross-country dispersion of deficit was decreasing over time (which indicates convergence), the evidence remained weak and unstable. In general, the magnitude of convergence was stronger for monetary variables but the majority of TFTA countries were still struggling to fuse (move towards convergence) and stabilise their fiscal positions.