GAEE Journal for Aspiring Economists, May 2021 Issue

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ISSUE 2 | MAY 2021



In this issue: CURRENCY UNION AS THE PANACEA FOR AFRICA A New Institutional Framework and Theoretical Consideration

ARTIFICIAL DECISION-MAKING A Theoretical Model for Artificial Learning, Memory Management and Decision Making System

HUMAN RESOURCES IN AFRICAN BANKING SYSTEM A Conceptual and Contextual Appraisal of Human Resources Management Strategies and Macro Factors in Sub-Saharan Africa

Letters: STUDENTS WEIGH IN: NORTH KOREAN ECONOMY Editor's pick from the top responses of GAEE's essay competition for students sponsored by the South Korea Ministry of Unification

Featured: MUTING THE DRAGON'S RINGTONE A Case for the Transition of the Indian Electronics Industry from China to Vietnam


TABLE OF CONTENTS 2: Editor’s Note 3: Director’s Note 4 – 25: Muting the Dragon's Ringtone: A case for the transition of the Indian Electronics Industry from China to Vietnam 25 – 26: Behind the Featured Paper of this Issue 27 – 74: Currency Union as a Panacea for Africa 75 – 95: Human Resources Management in Sub-Saharan African Banking Industry 97 – 104: Artificial Memory Management and Decision Making System 105 – 111: Students weigh in A solution for the North Korean economy 112: Call to Action

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Editor’s Note Dear Readers, Welcome to the second volume of the GAEE Journal for Aspiring Economists (GJAE) published by the Global Association of Economics Education (GAEE). Contributions to this volume had been immensely diverse and revolved around topics ranging from the proposal for a currency union in Africa to the migration of industries between states. This volume also features some editor's pick of the most thought-provoking responses to the GAEE's student essay competition on the North Korean economy hosted by GAEE in collaboration with the South Korean Ministry of Unification. Constructing volumes for this journal is a collaborative effort involving the dedicated work of GAEE's editorial assistants and scholars who volunteered their time and expertise to enable our journal's peer-review standards. Lastly, we thank the authors that contributed to this volume. We hope GJAE provides a forum for economics students to communicate their ideas and be better connected to others in this important field, and we hope readers feel and share the impact of this scholarship with the world. Sincerely, Yi-Sheng Wang, Ph.D. Interim Associate Editor Global Journal for Aspiring Economists

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Director’s Note Greetings, It is beyond my excitement to see the second volume of the Global Association of Economics Education (GAEE)’s flagship publication comes into full fruition. The GAEE Journal for Aspiring Economists (GJAE) is more than a platform created by GAEE to facilitate high-level economics discourse among students; it embodies the very fundamental value that our organization was founded in the first place—democratizing access to economics education among students in developing countries and marginalized communities. GJAE’s commitment to the free-to-publish open-access model, as such, is aimed at levelling the playing field by providing an accessible platform for economics discourse, especially among those disadvantaged demographics. I hope that you find the content of this volume insightful. I want to thank everyone involving in this project—particularly the editorial team—for making one of GAEE’s most ambitious goals from day one become a reality. Best regards, Le Dong Hai Nguyen, FRSA Founder & Executive Director Global Association of Economics Education

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Featured Article: Muting the Dragon's Ringtone A case for the transition of the Indian Electronics Industry from China to Vietnam By Kanika Gupta1 & Kashish Gupta2 1Lady Shri Ram College for Women, Delhi University; 2London School of Economics

and Political Sciences & Shri Ram College of Commerce, Delhi University. Abstract The policy of Atma-nirbhar Bharat is aimed at making India a self-sufficient and self-generating economy. This self-reliance sentiment was bolstered by anti-China protests due to the Galwan valley standoff. In this context, many Indian nationalists have vouched for the boycott of “Made in China” products especially electronics since they form 50% of Chinese imports and so moving to Vietnam is appreciated as a viable option. In this context, this paper uses the tools of comparative data analytics and constitute a Vector Error Correction Model (VECM) to analyze the efficacy of substituting Chinese imports with those from Vietnam and make a case for making this substitution possible. Index Terms: Atmarnirbhar Bharat, boycott China, electronics, VEC model
























Introduction India, China, and Vietnam initiated economic reforms around the same time, and all have had a fair degree of success in making their respective economies more broad-based and integrated into the world economy. The 0.00025 0.0002 following graph indicates the ‘Openness 0.00015 Index’ or trade to GDP ratio for these 0.0001 0.00005 three nations. 0

Fig 1: Trade Openness Index

From 1960 to 2008, there are continued instances of higher inclusiveness of trade in gross domestic product and relatively lower susceptibility to external shocks and volatility, ceteris paribus. The year 2009-10 has been identified as the year of structural break | Page 4 of 112

which is an implication of the global financial crisis. The global economy was in a slowdown mode due to which the contribution of international trade in the GDP for each nation has fallen by a great amount. In the recent years, a majority of income for Vietnam comes from international trade whereas Indian and Chinese net exports contribute relatively less than consumption and investment to the national output. The above diagram maps economic growth effects of trade whereas the following chart depicts the economic welfare effect of greater market integration by juxtaposing per capita income with the Balance of trade for each nation: 5E+11

Fig 2: Balance of Payment of China, India, Vietnam

4E+11 3E+11 2E+11 1E+11 0 -1E+11 -2E+11

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018





Fig 3: GDP per capita of India, China, Vietnam

10000 8000 6000 4000 2000 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 GDP(China)



The graphs highlight that all three countries per head income have continuously risen throughout the years, but Chinese growth has been exponential. On the other hand, Chinese BOP showcases a W-shaped trend, which reached its maximum in 2007-08 and minimum in 2018-19. Where China and Vietnam have witnessed a surplus on international trade, India has imported more than what it exports, and this trend was further accentuated after 2008. A clear picture emerges here. The country that has built its manufacturing capacity to sustain the domestic demands and satisfy global needs is the country that has seen an exponential rise in income per head. The country that depends on | Page 5 of 112

foreign goods and services in the country with the lowest per capita GDP. Hence, it can be alleged that self-reliance through lower imports and greater exports will bring economic welfare for a nation. The rate of import penetration can also measure such an advent of self-sufficiency. It is the ratio of import to domestic demand (GDP – net exports). The greater the extent of penetration, the lower the competitiveness of domestic suppliers and so poorer the scope of self-sufficiency. Fig 4: Rate of Import penetration

19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02 20 04 20 06 20 08 20 10 20 12 20 14 20 16 20 18

1.5 1 0.5 0 -0.5

China rate of import penetration India's rate of import penetration Vietnam's rate of import penetration

The above-stacked line chart highlights that China is the most self-sufficient, whereas Vietnam satisfies most of its domestic demand from imports. India is also endeavoring towards self-sufficiency as China is. This idea of self-sustenance has recently found a new vigor in India. The coronavirus pandemic has proved to be a catalyst in rejuvenating the spirit of self-reliance and selfsufficiency in India. In this context, the Indian prime minister Mr. Narendra Modi launched Atma-nirbhar Bharat's scheme on 12 May 2020 amidst the lockdown to make India a self-dependent and self-generating economy. "When the world is in crisis, we must pledge - a pledge which is bigger than the crisis itself. We must strive to make the 21st century India's century. And the path to do that is self-reliance," PM Narendra Modi said.

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To add to this idea, during COVID-19, global sentiments have accelerated against China. Galway issue further strained the 'Hindi Chini bhai bhai' relationship. Since India and China share integrated bilateral trade, one of the natural perceptions of this was banning the Chinese import. Of late, the national sentiment has hence polarized the whole idea of Atma-nirbhar Bharat as solely restricting imports from China. Fig 5: % of China’s share in India’s total imports

20 15 10 5 0


Taking a step back, we need to analyze our dependence on China more rationally:

From less than 1% in 1990 to more than 14% in 2018, the bar diagram shows that China has gradually increased its share in the total imports of India to become the second largest trading partner after the USA (The Economics Times 2020). On the contrary, India accounts for only 2.1% (Bureau 2018) of Chinese trade. Using simple maths, such a boycott will clearly hurt India more in the terms of both livelihoods and lives. Therefore, it’s worthwhile to access the feasibility of such a ‘wallet response’ which comes in the form of boycott of ‘Made in China’ products. Undoubtedly, in the short term, this move might appear to be highly idealistic and not practical. But in the long run, the same can become a reality if India either finds alternatives to China or develop domestic supply chains by increasing production, or both in conjunction. When we talk about diversifying imports, Vietnam seems to be one of the potential destinations. Low labour cost is one of the attractions for investment in Vietnam which is almost 50% lower than China (Statista 2020). Vietnam’s biggest specializations are in production of electronics, textiles and furniture. However, Vietnam seems to lack the required expertise, competence, and capital-intensive machinery to take China’s

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position as of now. So, it’s also worthwhile to examine Vietnamese dominance in India’s overall imports.

1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0


Fig 6: % of China’s share in India’s total imports India is now seeing Vietnam as a prospective import destination which is clearly highlighted by the bar diagram above. The exponential growth in import of Vietnam’s goods and services is bound to be witnessed in future also. When compared with China, the dependence of India on Vietnam’s commodities has been rising drastically whereas the same for Chinese products has become stagnant in the past 5 years. If this trend continues, India and Vietnam can witness greater economic integration in the coming 10 years. Further dissecting the trade relations between India and China, the following graph speaks that forms a major chunk of total imports from China. The South Asian country import more than 50% of electronics from China as of 2018. Before 2000s, India, it was negligible but post 2000 trends signify an increasing dependence of Chinese electronics to satisfy domestic demand for the same. 0.6 0.5 0.4 0.3 0.2 0.1 0 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Fig 7: Share of electronics in total imports from China Before jumping to conclusions, it’s worthwhile to understand the performance of Indian electronics industry in relation with China and Vietnam. | Page 8 of 112

Indian electronics industry Over the years, rising digital penetration at the last mile in India has resulted in greater domestic demand for electronics. The country has struggled with ramping up the production on the same scale due to which it has to increase its dependence on imports for other nations, China being the front runner. The following graph shows the global standing of Indian industry relative to other nations:


Fig 8: Market size of top electronics market (USD Billions)

1500 1000 500 0 China



South Germany Korea





As of 2020, India’s electrical industry was valued at $70 billion (Gurnaney 2020) and accounts for 3.3% of the global electronics market (Srinivasa 2020). Continuing along the same path, the industry is expected to grow at around 30% (Statista, Statista 2020) for the next five years. This growth can be attributed to initiatives such as Make in India and availability of internet at reduced costs. The economic scenario is leading the countries to shift the supply-chain from China. This opens up a hub of opportunities for the Indian electronics industry. To achieve and facilitate this growth, the industry needs remedy from high taxation, dearth of finance and power resources. The table gives an overview of the total imports of electronics and chemicals and the respective share of China and Vietnam in these commodities for the past 10 years. Undoubtedly, China captures a majority of share in the import of both the commodities. As of 2018, India imported approximately 26% of its chemicals and 34% of electronics from China whereas the respective share of Vietnam is 0.7% and 3.4%.

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Total import of Electronics

% imported from China

% imported from Vietnam

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

6E+07 6E+07 6E+07 8E+07 8E+07 8E+07 7E+07 8E+07 8E+07 1E+08 1E+08

18.95582 28.11598 29.00781 30.00263 29.5201 31.87096 34.38765 37.23201 38.29511 41.26324 33.90456

0.059097 0.279362 0.667052 0.870502 1.113719 2.225545 1.722952 1.603207 1.502165 1.665131 3.361423

TABLE I: Share of electronics imports

Now, it might also be rewarding to study the interplay of both Indian exports and imports. On visualizing the intra industry trade of India for electronics with respect of China and Vietnam using the Grubel Lloyd Index the following picture emerges:


Fig 9: Grubel Lloyd Index Intra industry trade

1 0.5 0 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 India's GLI for electronics with China India's GLI for electronics with Vietnam

!"! =

(%! + '! ) − |%! − '! | %! + '!

When !"! =1, the country in consideration imports as much it exports to a given region. When !"! =0, there is no intra industry trade and either the country in consideration is solely importing or exporting to a given region. First, let us consider China. The index | Page 10 of 112

has been close to 1 over the year which implies that India imports from and exports to China, though the magnitude of imports is undoubtedly greater than exports. Secondly, let’s consider Vietnam. India majorly engages in both imports and exports for electronics (!"! = 0.8). 1 0.5 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018


Revealed comparative advantage with China in electronics Revealed comparative advantage with Vietnam in electronics

After analyzing the status quo of intra industry trade, it might be valuable to look at the future potential and the relative long term advantage India enjoys between the electronics industry, for which the tool of revealed comparative advantage has been used:

Fig 10: Revealed comparative advantage This concept is based on the Ricardian comparative advantage concept, A value of less than one means than the country has a revealed comparative disadvantage. Here, India does not have has this potential for electronics clearly for both the countries. So, it might be difficult for India to walk the path of self-reliance and solely depending on its domestic manufacturing base and hence it would look for diversifying imports from countries like Vietnam. Literature Review In the paper ‘Vietnam-India Economic Ties: Challenges and Opportunities since 2007’, Ngo Xuan Binh attempts to analyse the strategic partnership of India and Vietnam since 2007. Over the years, both the countries have developed strategic economic ties, however issues such as similar export-import structure, geographical distance, cultural difference, transportation difficulties make the task at hand more complicated (Binh 2016).

A paper by NITI Aayog, “Make in India Strategy for Electronic Products”, weighs the two alternatives India has: export orientation strategy versus import substitution. The per capita income only doubled across a span of forty years when India practiced import | Page 11 of 112

substitution. The growth since 1991 has enlarged the domestic electronics market in India, while at the same time, the global market remains relatively smaller. Thus, if we aim at the world markets, the scope for expansion is humungous. With China’s share in the global trade of electronics declining, this is a one-time opportunity for India to capture the global market (Aayog 2016). Dipika Sahu in her paper “Impact of Bilateral Trade between India and China on Economic Growth of India” concluded that imports from China contributed around 11.5% to the Indian GDP while total exports to China during this period of consideration contributed about 14% to the GDP (Sahu, Impact of bilateral trade between India and China on economic growth of India 2018). In a paper by ‘Pacific Business Review’ it was found out that India is more important for China than China is for India. Also, China is a big threat to India in the case of dumping activities where India is force to impose duty on the imported product from China. The greatest issue is India’s growing trade deficit with China. (Manav n.d.) Hypothesis It will be difficult for India to resists its vulnerability to Chinese electronics imports in the short run. In the long run, dependence on Chinese imports can be reduced drastically and Vietnam can be seen as potential alternative. Methodology & Results The data analysis in the present study uses secondary data for three variables: Gross Domestic Product per capita and Import of electronics from China and Vietnam for 31 years from 1988 to 2018 in India which was sourced from the World Integrated Trade Solutions (WITS) database. A classical multivariable linear regression model suffers from high degree of multicollinearity, autocorrelation and non-normality of error terms which leads to spurious regression results. The presence of such specious regression ensures the absence of the linear relationship between the time series variables GDPPC and Import of electronics from the given countries. Therefore, this study motivates to investigate the existence of both short term and long run association between the sample time series

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variables adopting Johansen co integration and short run causality of import of electronics from China and Vietnam on GDP and GDP on Import of electronics employing Vector Error Correction Model (VECM) and appropriate coefficient diagnostic test called wald statistics. Before testing the cointegration and causality the sample time series data was involved for stationarity testing using the popular Augmented Dickey Fuller (ADF). To determine the optimal lag length, Akaike information criterion (AIC) has been used. Finally, the model is then checked for no autocorrelation, stability and normality of error terms. The entire data analysis has been performed STATA econometrics software in this study. Augmented Dickey Fuller Test This test is used to check whether a given time series is stationary over time or not. If a series is showing a trend (upward trend in our case), this means that the series is nonstationary. To check more formally, a general multivariable double log regression has been performed with following results: TABLE II: Comparing R squared with Durbin Watson statistic Log (GDP per capita)

Log (import of electronics from Vietnam) Log (import of electronics from China) constant R-squared Adjusted R-squared F-statistic Prob. D Watson statistic No. of observations


Standard errors















0.9469 0.9421 196.16 0.0000 .2386804 25

When R-squared > Durbin Watson statistic, as in this case, means that the outcome of regression is unstable and coefficients change sign on underfitting or overfitting and hence | Page 13 of 112

the model is non stationary. It cannot be used for prediction and forecasting. So now the augmented dickey fuller test has been used to check for stability: TABLE III: Results of Augmented Dickey Fuller test Levels


First Difference







Log (GDP per capita)


Log (import of electronics from Vietnam)


Log (import of electronics from China)


1% 2.492 5% -3.318 -1.711 10% -1.318 1% -2.552 5% -1.734 -3.863 10% -1.330 1% 2.479 5% -3.728 -1.706 10% -1.315

Critical values 1% 2.500 5% -1.714 10% -1.319 1% -2.567 5% -1.740 10% -1.333 1% 2.485 5% -1.708 10% -1.316

H0: Variable is non stationary In the normal log form, for each variable test statistic < critical values at 1%, 5% and 10% significance level. Hence, we cannot reject the null hypothesis. On taking the first difference, for all the 3 variables, test statistic > respective critical values at the given level of significance, we reject null hypothesis. Now, the model is stationary at the first difference. Hence, first difference of these 3 variables will not be used for further analysis.

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TABLE IV: Visual representation of stationarity

Non stationary


All the 3 variables are mostly rising showcasing a constant trend over the years. Especially, after the year 1995 it can be visualized from the line graph inserted here that the log of GDPPC and imports of electronics from Vietnam and China exhibits a rising trajectory. Taking the first difference of these variables make them stationary around 0. Johansen – Juselius Cointegration test Cointegration, an econometric property of time series variables, is a precondition for the existence of a long run econometric relationship between two or more variables having unit roots, integrated of order one. The Johansen approach shows that two or more random variables are cointegrated if each of the series is themselves non-stationary, and they have a long run equilibrium relationship among the variables. The precondition for applying Johansen Cointegration test is the variables must be non-stationary at level but when convert all the variables into first difference then they will become stationary. The multivariate cointegration model can be expressed as: &$%

./" = 0# + 1/"$% + 2 3! ./"$! + 4" !≝%

where π and ri are coefficient matrices, p is the lag order based of AIC and . is the symbol of difference operator. Specifically, the maximum eigenvalue test and trace test

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are used to test for the number of co-integrating vectors which can be computed respectively as: (

5(3) = −5 2 67 91 − ;<! = !)*!"

; >?% (3, 3 + 1) = −5 6791 − ;<*+% = where ;<! is the expected eigenvalue of the characteristic roots and T is the sample size. H0 (Trace test) = investigates the number of r cointegrating vectors against the alternative of n cointegrating vectors. H0 (Maximum Eigenvalue test) = investigates the number of r cointegrating vectors against the alternative of r+1 cointegrating vectors. The results are as follows: TABLE V: Results of Johansen cointegration test Cointegrating regressors


Log of GDP per r=0 capita = f(log of r≤1 imports from Vietnam r≤2 and China)


Trace statistics

Critical value at 5%


Critical value at 5%

r=1 r=2

61.7619 14.2337

29.86 15.41

47.5282 9.8705

20.97 14.07






H0 = There is no cointegration (r = 0) H1 = There is cointegration among variables Here ‘r’ means rank and if it is equal to 0 then the null hypothesis stands. Since the critical value is lesser than both trace statistic and Max-L statistics at r = 0, we reject the null hypothesis. At rank 0 there does exist cointegration. It is at rank 1, where both trace statistics and Max-L statistics are lower than the critical value at the 5% significance | Page 16 of 112

level, which means we do not reject the null and so there exists no cointegration among all variables. Since they are co integrated, there exists both short term and long run relationship among variables which is now further examined using the VECM test. Vector Error correction model Vector Autoregressive (VAR) model is one of the special forms of system simultaneous equations. Model VAR can be applied only if the variables are not cointegrated. But since the variables taken here are both nonstationary and not cointegrated, VECM is used. It is a VAR model which has been designed for use white non-stationary data having cointegrating relationship. It is one of the time series modeling’s which can directly estimate the level to which a variable can be brought back to equilibrium condition after a shock on other variables. VECM is very useful by which to estimate the short-term effect for both variables and the long run effect of the time series data. A Vector Error Correction Model (VECM), which can be derived from the long-run cointegrating vectors, can be used to determine the direction of this causality. ,$%



.B" = 0 + 2 C! .B"$! + 2 ∅! .E"$- + 2 F! .G"$. + ;% HI5"$% + J33K3 LJ3> !)% ,$%

-)% ,$%

.)% ,$%

.E" = µ + 2 C! .B"$! + 2 ∅! .E"$- + 2 F! .G"$. + ;/ HI5"$% + J33K3 LJ3> !)%

-)% ,$%

.)% ,$%


.G" = N + 2 C! .B"$! + 2 ∅! .E"$- + 2 F! .G"$. + ;0 HI5"$% !)%



+ J33K3 LJ3> where, k-1 = optimal lag length reduced by 1 C! , ∅! , F! = short run dynamic coefficients of the model’s adjustment long run equilibrium ;! = speed of adjustment parameter with a negative sign | Page 17 of 112

HI5"$% = the error correction term is the lagged value of the residuals obtained from the cointegration regression of the dependent variable on the regressors. It contains long-run information derived from the long-run cointegrating relationship. B" = Log of GDP per capita, E" = Log of imports of electronics from Vietnam, G" = Log of imports of electronics from China TABLE VI: VECM results Log of GDP per Variables capita (O) .3011909 B"$% -.1269102 B"$/ .0537457** E"$% -.1042307** E"$/ -.1513046 G"$% .2084848* G"$/ ECT -.0803116 Constant .0863859**

Log of electronics imports from Vietnam (X)

Log of electronics imports from China (Z)

-3.208052 -1.941218 .1862277 .0350547 .0694316 1.503766** .8715176 .2610035

1.69466* .3131986 -.0652684 -.2430585* -.5891285 .6636715* -.724025* .3045909*

TABLE VII: Long run equilibrium Log (GDP per capita)

Log (import of electronics from Vietnam) Log (import of electronics from China)


Standard error

Z statistics










NOTE: Here * represents significance at 5% level and ** shows significance at 10% level.

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So, the equations are as follows: PO1 = Q. QR + Q. SQPO1$2 − Q. TSPO1$3 + Q. QUPV1$2 − T. QWPV1$3 −Q. TUPX1$2 + Q. YTPX1$3 − Q. QZ [\]1$2 PV1 = Q. Y^ − S. YTPO1$2 − T. RWPO1$3 + Q. TRPV1$2 + Q. QWPV1$3 + Q. Q_PX1$2 + T. UQPX1$3 + Q. Z_ [\]1$2 PX1 = Q. SQ + T. _QPO1$2 + Q. STPO1$3 − Q. Q_PV1$2 − Q. YWPV1$3 − Q. URPX1$2 + Q. ^^PX1$3 − Q. _Y [\]1$2 And the long run equilibrium is: HI5"$% = B"$% − `- E"$% − 4. G"$% [\]1$2 = O1$2 − Q. YYV1$2 + Q. YSX1$2 Where, B" = Log of GDP per capita E" = Log of imports of electronics from Vietnam G" = Log of imports of electronics from China The long run model can be interpreted using elasticities. A percent increase in imports from China leads to a fall in income per head of India by .23% and an increase in the same by .22% when imported from Vietnam. The error correction term coefficients represent the speed of adjustment which is very high here (-0.75). It can be said that when imports from Vietnam is too high then Chinese imports rapidly adjusts downwards to match the former levels. This makes a case that import of electronics from both the countries run in the opposite direction and hence Vietnam can be seen as a competitor to China. Additionally, high GDP per capita implies very fast fall in Chinese imports which explains a growth induced import demand. It gives us a case to reason that imports do not cause income per head and hence boycotting Chinese product might be feasible. | Page 19 of 112

In addition to determining the direction of the causality, these equations may also be used to define short run causality. To formalize it more, Wald test has been used to check whether dependent variable reacts to only short-term shocks coming from the independent variables not. TABLE VIII: Results of Wald Causality test H0: Null hypothesis Imports of electronics from China does not cause GDP per capita in short run Imports from Vietnam does not cause GDP per capita in short run. GDP per capita does not cause import of electronics from China in short run. GDP per capita does not cause import from Vietnam in short run.

Chi squared












Don’t reject

Don’t reject Don’t reject

This indicates no bidirectional short-term causalities between GDP per capita and electronics imports from Vietnam. But there exists a unidirectional near run causalities when it comes to China since GDP per capita causes imports of electronics from China and not vice versa. Hence, imports from both the countries does not cause income per head in the short run. -ConclusionThe tool of revealed comparative advantage cautioned us against the sole dependence of domestic manufacturing base to meet the growing demand of electronics and hence we felt the need to look out for import diversification where Vietnam emerged as a suitable alternative. The cointegration tests shows that there exists a long run equilibrium relationship among GDP per capita and import of electronics from China and Vietnam. More specifically, since it has been established that an increase imports from Vietnam increases income per head by 0.22% but imports from China reduces the same by 0.23% it makes economic sense to reduce dependency on China. Additionally, Chinese imports

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doesn’t induce a growth in Indian GDP per capita but rather it is driven by the economic growth. Since Vietnamese imports act as a competitor to Chinese, if India were to import electronics from Vietnam then it will automatically let go of its resilience on Chinese goods. The VEC model speaks volume and hence presents a strong case to move from China to Vietnam. Appendix Skewness of the variables in the double log regression model and log transformation:

The variables considered in the VECM are in the log form to ensure normality and stationery of the same. TABLE IX: Skewness Import of electronics Variables from China Skewness 1.099963 Log skewness


Import of electronics from Vietnam

Indian per capita GDP





Testing for autocorrelation Serial correlation or autocorrelation occurs when the error terms in the model are related. When autocorrelation is present, the OLS procedure still produces unbiased estimates but increases the variances hence the OLS estimators ceases to be BLUE. Using the Lagrange-multiplier test: H0 = There is no autocorrelation TABLE X: Autocorrelation Lags Chi-squared Prob. 1 13.2851 0.15012 2 8.8005 0.45589 Since p value is more than 0.05, we cannot reject the null hypothesis and hence the model does not suffer from the problem of autocorrelation. | Page 21 of 112

Testing for normality of errors This means while taking the average, positives tend to cancel negatives of the error terms and hence mean=0. The central limit theorem ensures that errors follow such distribution for large observations. The t-test and F- test are not applicable unless the error term is normal distributed. Using the Jarque-Bera normality test on the residuals: TABLE XI: H0: Errors are normally distributed Equation Chi-squared Prob. Plog of GDP per capita 0.010 0.99522 Plog of electronics imports from China 0.378 0.82790 Plog of electronics imports from Vietnam 0.192 0.90843 All 0.579 0.99673 Since p value is more than 0.05, we cannot reject the null hypothesis and hence the residuals are normally distributed. Testing for model stability TABLE XII: Using the eigenvalue stability condition: Eigenvalue


1 1 -.8601394 .6723458 + .4080283i .6723458 - .4080283i .7792462 -.09342306 + .723929i -.09342306 - .723929i -.6185566

1 1 .860139 .786471 .786471 .779246 .729932 .729932 .618557

The VECM specification imposes 2-unit moduli and hence model is stable.

| Page 22 of 112

References *Data for all the figures have been derived from World trade database and World Integrated trade solution

Aayog, Niti. 2016. "Make in India Strategy for Electronic Products." Binh, Ngo Xuan. 2016. "Vietnam–India Economic Ties: Challenges and Opportunities since 2007*." SAGE Journals . Bureau, PHD Research. 2018. India – China Trade Relationship: The Trade Giants of Past, Present and. New Delhi: PHD Chamber of Commerce and Industry. CII. 2015. Confederation of Indian Industries . GXO9hLECvTuNskmvgGjRIRgzWycLq2dn10. CRISIL. n.d. "Chinese blessing for." CRISIL Journal. Dubey, Smita. 2020. "Atmanirbhar Bharat Abhiyan: An Analytical Review." Dogo Rangsang Research Journal . Florian Budde, Pinak Dattaray, Tejas Dave, Avinash Goyal, Suyog Kotecha, and Karthikeyan K S. 2020. McKinsey. 28 Februrary . Gupta, Deepti. 2020. Invest India. Gurnaney, Tina. 2020. The Economics Times. 06 January . "McKinsey of chemicals." 2018. Sahu, Dipika. 2018. "Impact of bilateral trade between India and China on economic growth of India." International Journal of Management, IT & Engineering. | Page 23 of 112

Srinivasa, Kavitha. 2020. Engineering & Technology . 03 April. Szmigiera, M. 2020. Statista . —. 2016. Statista . —. 2020. Statista. PTI. 2020. The Economics Times. 23 February. —. 2019. The Economics Times. 27 August . Conflict of Interests The authors declare no conflict of interest.

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Behind the Paper Kashish Gupta and Kanika Gupta co-authored the paper “Muting the Dragon's Ringtone: A case for the transition of the Indian Electronics Industry from China to Vietnam,” which was selected by the Editors as the Featured Article of this Issue. Featured authors are given the opportunity to share with us a glimpse into their motivation behind their research thesis and the decision to submit their manuscripts on GJAE. Below is what our two authors had to say: Last year, when the COVID- 19 pandemic unleashed its economic consequences by disrupting supply chains across industries, the disastrous impact on the Indian electronic industry was widely covered by Indian leading newspapers. Being avid readers, we constantly discussed and debated the call to 'Boycott Chinese Product' among ourselves. Due to the Indian overdependence on Chinese manufacturers and the considerable proportion of electronics in the trade balance, many economists were quick to suggest feasible alternatives to China. Being economics students, the possibility of studying the efficacy of these alternatives got us intrigued. Moreover, being an active citizen of the country and a part of the demographic dividend, we strongly believed that if we can come up with concrete alternatives to China, we can influence actual policies of the country. We quickly grabbed this as a golden opportunity to apply our macroeconomics, international trade, and econometric coursework to real-life cases. As aspiring policymakers, this research study exposed us to the power of data-driven and fact-based conclusions and decisions. Having worked on this paper for more than four months and getting it supervised by leading professors, we were very sure of its quality and the importance of the results. Hence, all we wanted was the right platform and the right audience to read it. But our endless search for quality economic journals hit a roadblock when we realized that almost every journal asked for a publication fee of £100 - 200. Being non-working students, bearing such high cost was not a possibility. Around that time, GAEE opened | Page 25 of 112

its application for its journal. Being one of the few economics journals in the world to waive the publication fee, it was the right platform for students like us. We felt fortunate. Being the co-founder of the GAEE chapter of Lady Shri Ram College (LSR), Kanika was sure about the authenticity and reach of the journal. This journal gives a twofold advantage to our readers and us. Firstly, our results will finally reach the right kind of audience. Secondly, we will be able to disseminate economics literacy to aspiring young economists like us from developing and marginalized communities through our work. Finally, after three months of patience, we are incredibly grateful that our paper has been nominated to be featured in this issue. Just like GAEE's vision is to empower students to learn economics, this journal has also empowered us to undertake high-quality research in the future. ~ Kashish Gupta & Kanika Gupta Kashish Gupta is a final year student at Shri Ram College of Commerce, Delhi University pursing B.A. (Hons) Economics and an incoming M.Sc. Economics student at the London School of Economics and Political Science (LSE). A resident of India, the author is strongly motivated by the geopolitical moves of the country and wants to specialize in the same. She has worked at the Ministry of Commerce and Industry, India as an International Trade policy and development intern. She has successfully led a team of 60 consultants at 180Degrees Consulting SRCC, world’s largest student run pro bon consulting organization. Ms. Gupta has delved into multiple research projects, some of which are, women in agriculture, impact investing and pollution hazard in Eurasia using the tools of econometrics and comparative data analytics. Kanika Gupta is pursuing B.A. (Hons) Economics at Lady Shri Ram College for Women, University of Delhi. A second-year student, the author is a resident of India. In the past she has interned with Kawasaki Heavy Industries Private Limited in the field of Finance. She co-founded the LSR chapter of GAEE and is also heading the Finance Cell of Economics Department at LSR. Ms. Gupta's interest in research stems from her experience as a Student Consultant and Research Analyst in fields of specific booms, consumer behavior and international trade relations.

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Currency Union as a Panacea for Africa A New Institutional Framework and Theoretical Consideration By Stanley Abban1 1Kwame Nkrumah University of Science and Technology, Kumasi, Ghana Introduction A currency union is a union to which two or more countries agree to surrender their monetary sovereignty to adopt an official currency issued by a Central Bank tasked with formulating and implementing monetary policy. Currency union came to light when there was a need for choosing a suitable exchange rate regime as an improvement on the fixed exchange rate. Comparatively, currency union is superlative to fixed exchange rate due to equalization of price through the laid down nominal convergence criteria and the introduction of a common currency to ensure greater transparency in undertaking transactions (Rose, 2000; Abban, 2020a). Currency union is touted to emanate several gains and has the potential to be disastrous based on the conditionality among memberstates. Empirical studies emphasize the main advantages of currency union membership lies with the elimination of exchange rate volatility to increase savings, relaxation of policies that hinder the free movement of persons and capital to improve trade and tourism, price transparency to intensify trade, and the ability to induce greater Foreign Direct Investment (FDI) to stimulate intra-trade flows (Rose, 2000; Micco et al., 2003; Aristotelous & Fountas, 2009; Rodriguez et al, 2012). The key areas that benefit from currency union membership include production, the financial market, the labour market, tourism, the private sector, the political environment among others (Karlinger, 2002; Martinez et al, 2018; Formaro, 2020). On the other hand, the main disadvantage includes the operational cost of adopting a common currency, potential asymmetry of shocks due to fiscal spillovers, and language barrier. Language barrier will not be a major impediment to trade when countries use a common currency hitherto transparency backed by technology will ensure members adjust with one another over time. Also, when greater trade flows are endogenously determined among members, countries will be less exposed to external

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shocks. In the argument of Rose (2000), the main facilitator in the stimulation of the gains of a currency union is contingent on the private sector involvement backed by mutual trust and elimination of national chauvinism. Developed countries with greater contribution to world trade are liable to use sovereign currencies compared to developing countries. Due to the other incentives of a currency union, advanced countries also enjoy the membership of the union. The official documentation of currency union membership began with the European Monetary Union (EMU). The main purpose of the integration was to consolidate the gains of members in international trade, eliminate potential trade distortions affecting pricing, and eliminate extreme nationalism among others. However, the EMU fuelled debt stock due to the substandard mechanism to check compliance and the level of borrowing in the initial stages of currency union membership (Abban & Ofori-Abebrese, 2019). Additionally, the main attributing factor for the crises in the European Monetary Union was the large public sectors heavily financed by external debts and the attractiveness to borrow from the international market. Despite the challenges, trade statistics showed that currency union formation increased the trade flows among members. In developing economies, the use of independent currencies serves as a trade barrier due to the cost of exchanging one currency for the other. This is intensified by the high demand for foreign currency to trade among developing countries of the same trade bloc. The use of sovereign currencies allows countries to borrow to stimulate employment, infrastructure, and economic growth without strict adherence to macroeconomic restrain. Additionally, one major advantage of the use of sovereign currencies is the ability of countries to devalue to boost trade. However, countries that have a significant contribution to global trade and an optimal level of importation can exclusively benefit from devaluation. Given this, countries that do not contribute significantly to global trade cannot maximize the gains from devaluing their currency and will suffer from the adverse effect of imported inflation if the country is a highly import driven economy. Empirically, studies on developing countries have not been able to measure the exact cost involved in using sovereign currency, due to most transactions are undertaken using foreign currencies hence the high demand for foreign currencies. Therefore, establishing the link | Page 28 of 112

between exchange rate volatility of sovereign currency and trade was difficult to establish over the years. In this background, the cost of using sovereign currency passes through two channels which emanate greater cost when counties are highly import driven. Thus, the additional transaction cost for accepting the sovereign currency and the cost of using foreign currency engaging in international trade. However, the technicality of some sovereign currencies used by some developing countries maximizes the gains from international trade. Thus, if the currency is convertible, there is a greater tendency to ease transaction costs compared to a strict sovereign currency. To adopt a convertible currency, there is a need to have buffers to reduce the volatility of the currencies. The relatively low contribution of African countries to global trade and substandard buffers makes the currency more volatile therefore a greater tendency of eroding the gains from trade. As a result, investors in developing countries proxy their investment in dominant currencies. A foreign currency serves as the bridge between the two sovereign currencies therefore currency union eliminates the bridge and serves as a direct link between the countries. However, there is a need for preliminaries of the policies before adopting a common currency. In Africa, producers were faced with a relatively small market size due to protection set by countries while demand for goods is high, which has festered for some decades reminisced from resentments of indigenous producers leading to high imports. As a result, the most prevalent job opportunities in Africa were small-scale businesses. In light of currency union formation, countries will benefit from the elimination of transaction costs hinged on the policy on the common currency, free movement of persons, and the Right of Residence and Establishment. Thus, currency union reduces the heavy reliance on foreign investors to indigenous investors. Under the policy of a common currency, indigenous producers can form cartels and conglomerates to facilitate the diversification of the economies. As a result, import controls can be enhanced with the initiation of a common currency. Additionally, most foreign investors index their profit margin to the size of the market and exchange rate risk, therefore relatively small countries would benefit from improved pricing due to an integrated market coupled with sound macroeconomic stability. | Page 29 of 112

Also, there is a lack of an internally superlative organization empowered to serve as a check on the sovereign governments. The existence of obsolete laws has led to a reactive rather than proactive nature of economic organizations to which African countries hold membership hitherto inhibiting stronger political ties. In this background, the existing framework of integration could worsen the economic stance in the future unless countries integrate to tackle ills among members. The existing framework will likely yield both internal and external adverse effects if further integration is not pursued. In the background of internal effect, the member-states are plagued with several barriers that erode the gains from trade such as smuggling, bribery, and corruption, embezzlement of national coffers, wrong invoicing, security-related issues hitherto trade barriers (Abban, 2020a). Moreover, the resources of most countries are mismanaged and misappropriated with demographic dispensation on a high. Also, the use of sovereign currencies harms the growth of the banking sector by impeding financial inclusion in developing countries where there is a relatively large informal sector. Additionally, the non-convertibility of currencies contributed to the current ameliorated state of economic affairs with the high demand for foreign currencies to facilitate intra-regional trade. As a result, some currencies were convertible at black market price which led to currency hoarding. In the context of external effect, the heavy reliance on foreign direct investment (FDI) inflow from foreign partners exposes the economies to greater external shocks therefore the need for further integration. In this background, the 2008 International financial crises were a major contagion to the effect of FDI inflow to developing countries. More so, the COVID-19 pandemic had derailed supply chains and halted economic activities signaled the exigency for further integration. In this context, most countries experience relatively higher inflation dispersion or volatility beyond the consistent band. Moreover, the turbulence on the change in climatic conditions has a significant effect on agricultural production and the growth of the primary sector which would harm the volume of accumulated reserves (Abban, 2020a). Additionally, there were current distortions in global trade due to some advanced countries stifling their trade policies, and practicing home bias. According to World Data Lab, approximately eighty percent of countries deemed to fail in eradicating poverty will be in Africa. Therefore, to increase the longterm competitiveness of the economies to reduce poverty in Africa, there is a need to

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integrate further to form a currency union. Currency union with a common policy tends to unearth greater trade potentials among the countries. Empirically, Countries adopting a common currency benefit from three major channels to impact trade. The threedimensional effect has a stronger impact on the transformation of the economies by curing prevalent ills in the economy in line with improved standards of living. Figure 1.0: Conceptual framework of Currency Union Effect on Economic Growth

From the diagram above, adopting a common currency reduces transaction costs amongst member-states by eliminating exchange rate volatility. All things being equal, this would lead to increase savings. Can the level of savings be reduced based on the quantity of money printed in the union? To induce Foreign Direct Investment (FDI), there is a need to reduce inflation variation, exchange rate volatility, public debt to GDP, provide an official channel for foreign investors, greater transparency to reduce the tax burden in the economy, and ensure a sound business environment among others. The main source of FDI inflow emanates from the intra-membership inflows in the currency union and foreign investors. In a currency union, FDI can be stimulated through the policy and production effect. In this background, currency union leads to the formation of a relatively larger market for the | Page 31 of 112

production and consumption of goods and services. This provides an additional incentive for domestic producers to enjoy economies of large-scale production. Furthermore, the FDI inflow could result from integrated money and capital markets to ensure crosscountry portfolio diversification. In the same vein, the money market deepens because stocks would be indexed in a single currency with no additional transaction costs on the integrated market. For developing countries to maximize the gains of currency union membership, there is a need to consciously outline policies to induce greater FDI inflows. The strength of a currency union as a panacea for ills can be achieved with an appropriate institutional framework, policies, and trade and transport infrastructure among others. For countries to give up their sovereign currencies to form a currency union, there is the need for the three policies to be implemented effectively with no exceptionality. The policy of free movement of persons, goods, and capital, the Right of Residence and Establishment and Trade Liberation Schemes (TLS). Currency union can help attenuate the level of corruption and other forms of barriers when the Central Bank oversees the activities of the National Banks. Also, the lack of appropriate channels for investors’ sprawls corruption-related activities, therefore, forming a currency can provide the needful platform. Additionally, currency union ensures price transparency which equalizes price, therefore, attenuating smuggling by eliminating price differential among members. Furthermore, currency union ensures adequate market information for the allocation of resources. Also, the implementation of laudable policies to eradicate cankers is booted by the opposition parties and victims, therefore, rebelling against the sitting government due to the high illiteracy rate of indigenes. Given this, currency union can provide the platform for continuity of national development projects and policies towards achieving the long-term growth and development of the member-states. Currency union with a common policy set out an institutional framework to ensure the attainment of a political union. Currency union with a common policy can ultimately lead to the documentation and development of tourist sites by developing a common policy variable. In a nutshell, currency union can lead to unearthing the relatively large informal sector through a laid-out diversification policy. 1.1 Institutional Setting

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Given this, the study seeks to suggest a new institutional framework to this effect. The Policy Review Team should be tasked with reviewing all policies of political parties before the official launch of their manifestos. The reason for the review is to eliminate the favourability of some policies to woo voters by politicians satisfying the short term needs but detrimental to the long-run growth of the region. Therefore, such policies will be heavily scrutinized. The Team should be tasked with interrogating the ministers, senators among others, on their intended projects with the assigned funds and make the information available to the populace before an election. The developmental projects will be communicated on a website based on demarcated districts, regions, among others that are accessible to the populace. The Team further ascertains the achieved projects before an election period. The Regional Economic Policy Unit under the aegis of the Policy Review Team should facilitate the continuity of good policies and coordinate among member

states. The Contract Specialists Group under the auspices of the Central Bank should evaluate contracts of the various member-states which are detrimental to the long-term growth. The Group will also be responsible for social impact reforms and providing the framework for businesses to contribute to the social well-being of the citizens. Also, tasked with the formulation of business laws, harmonization of policies, and business cycle synchronization. The Currency Group should focus on policy coordination with the national policies of the member-states to ensure economic growth through financial and macroeconomic stability. Moreover, the Group will be tasked with monitoring and improving the integrated financial market. The Group will seek to follow up on the summit report and outline recommendations of up-surging issues of socio-economic importance. It should be comprised of policy analysts and finance ministers.

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The Commission should analyze the convergence of member states in line with the stability pact and other agreed policies. It should access the economic circumstances of the member states and suggests to the council for policy formulation. The Commission should evaluate political and economic hindrance to trade in the region as well as other important issues of pressing attention. The Commission should be tasked with the elimination of political monetization, state capture, and reduce in-house partisan disputes. Also, every government must be well scrutinized on budget, disbursement, and conducts with the report available before an election year. The Economic and Finance Council should comprise of economists, ministers of finance, and researchers of all member-states representing each member-state in the policy orientation process at the Central bank with the National Banks Economic Council comprising of 20 economists of the member countries forming the second supra authority with the Governor the highest for transparency and fair policy initiatives among member states. The Council should evaluate all activities undertaken by each team, group, and commission. The Evaluation and Investigative Team should be tasked with evaluating how the government performed per their manifesto and how funds were disbursed before an election. The Team will begin by evaluating how funds were disbursed by Senators, Ministers, and anyone funds were channeled through at the constituency level. The policies should be in sync with the national and regional policies and the needs of the people which would be accounted for when the tenure is falling due. The Ministers, Senators among others, are to prepare a proposed plan on how each fund will be disbursed per the needs of the indigenes to serve as a standard for the team to evaluate the progress. The Team is to create a platform for indigenous contractors of professional backgrounds to bid for the contracts in terms of costs and quality. The Team should evaluate, encourage and support institutions’ internal integrity management initiatives such as setting up complaint resolution mechanisms for citizens to report any bribery incidents they encounter or service delivery charters outlining the | Page 34 of 112

services offered, the amount of time taken, and fees charged to access the services. Also, the Team should be tasked with reviewing all activities of the Electoral Commission to ensure political parties are not incongruous with proceedings without malice before an election. Additionally, the Team should be tasked with the digitization of services to reduce service transaction time and minimize human contact. Marketing and Innovation Group will be charged with the marketing of the goods

produced and suggest ways to improve the branding of the products. The Group should reach out to prospects, investors, customers, and maintaining a high standard brand. The Group will serve as an intermediary between the customers, investors, and producers to ensure efficient communication to all related parties and coordinating the marketing system. This can be easily achieved through some digitalized coordinated cross border activities. The Group should advice the indigenes of the prices of extractive minerals and how to get the best deal from selling to the government. Additionally, the Group should be responsible for culminating innovative ideas and creative inventions to be heavily financed and marketed for the domestic and global market. Regional Human Rights and Drug Trafficking Unit should be under the aegis of the Security Coordination Group. The Unit should be tasked with mapping drug traffic routes,

interrogate culprits on the acquisition route, and abolish all drugs that are detrimental to human health. The Unit should be tasked with undertaking checks at vantage points and equipped with the necessary tools to enhance the effectiveness of the department. The Unit should digitalize all drugs categorized as illegal, conditional use among others on a common platform, and effectively communicate the health implications to the populace. Also, the Unit should be charged with investigating the authenticity of drugs sold on the market to avoid the sale of complicated health drugs. Labour and Wage Group should be responsible for setting out the regional minimum wage

and resolve labour-related issues resulting from the integration. Also, it should focus on integrating the labour markets of member-states and resolve labour market pressures. In | Page 35 of 112

this background, the Group should be tasked with initiating policies that will enhance the level of savings of labour and design a policy framework for showing the various component of the unemployed populace to effectively map with available vacancies within the region especially related projects undertaken. The Education and Training Group should be tasked with grass route education on the need for some practices to be curtailed. The team is to advise the populace on how their direct and indirect behaviours affect the economy as a whole. The Group should devise active policies to involve citizens’ vigilantism towards keeping the environment safe for living. The Group should be in consultation with the populace on the needs of the populace as well as acquiring information for policies implemented to ensure improvement in the policy delivery. Real Estate and Planning Evaluation Team should be tasked with outlining standardized

plans to put up buildings capable of housing people without land wastage. The Team should map out locations for the government to put up buildings as a housing unit for indigenes with dilapidated buildings whiles making room for people to stay. The purpose of the Team is to reduce the adverse effect of land wastage as well as reducing the size of productive lands to stimulate economic growth. Government Specialists Group should be tasked with mapping out unproductive arable

lands and evaluate the possible primary sector activity that can be undertaken on the land without been left in a deplorable state. The Group should be tasked with ensuring negotiations with owners of the resources and ensuring a suitable livelihood for persons of the status quo. In this view, the owners of the resources should be well briefed and considered in any adjustment in the decision. The Group will be mandated to have consultations with the indigenes and traditional leaders. The Sanitation and Environmental Control Unit should be tasked with devising innovations for the disposal of waste and reducing the level of waste in the environment. The Unit | Page 36 of 112

should be tasked with the protection of water bodies, land, and air. Any act that is detrimental to the environment should be abolished backed by law. The Unit should be responsible for initiating academic competition among students to ensure knowledge is obtained to develop an appropriate and efficient policy variable to extirpate the effect of pollution and damages. Education Review and Reform Team should be tasked with introducing courses that have a

direct effect of eradicating the regional problems as well as addressing the shortfalls and needs notably on unearthing the large informal sector, trade and transport infrastructure, policies on savings, capacity building among others. The Team should be tasked with documentation of academic innovation and creativity by assigning the patent right to inventors. Technology should be practically executed as a precondition. The Electioneering Team should be tasked with undertaking elections. The possible candidates to serve as Electoral Commissioner should be suggested by the incumbent government but highly assisted by the Team and other commissions. The Team should devise policies to contain staunch political affiliates from exhibiting unlawful political tensions. Every year, the Electoral Commission should open a portal for indigenes of the constituent to assess their Member of Parliament. The specific amount given for the developmental project should be accountable for per the standards outlined for the funds to be used. The Team should evaluate all costs involved in the electoral processes. The Investment Monitoring Group should be tasked with outlining formal channel for foreign investors to avoid corruption blotted contracts. The Group should be tasked with partnering domestic investors with foreign firms to undertake the task. The Group will be tasked with assigning rule of origin to countries heavily funded to maximize production. The Group should be tasked with the implementation of the Common External Tariff (CET). Additionally, the Group should monitor and supervise the even spread of investment across member states.

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The Database Management and Analysis Team should be tasked with synchronizing the database for all citizens from childbirth. The Team should be tasked to compile all databases including occupation, residence among others. This database will automatically drift the populace of voting age to the Electoral Commission platform. The Team should be tasked with analyzing the trends of the data for policy purposes. The Financial Market Coordination Team should be tasked with integrating the financial markets of member-states. Initiating policies that are suitable to induce foreign investors and ensure greater portfolio diversification among the populace. The Team should educate on the need to invest in the financial markets as a platform for indigenes to maximize gains from their savings. They should register potential financial institutes on the market for indigenes to invest in. The Fiscal Coordination Team should focus on the effective coordination of fiscal policies. Effective fiscal policy coordination would be a tool for recovering from idiosyncratic shocks. In this context, the Team should be responsible for cross-border fiscal transfers to countries hit with bad shocks. The Team should be charged with the evaluation of funds needed to help attenuate the effect of shocks and the coordination of budget evaluation and allocation. Also, the Team should help member states with huge budget deficits devise policy towards deficit reduction. The Research Group should be tasked with undertaking research concerning policies that are likely to have a favorable effect on the growth. In this background, the focus should be on improving transparency and diversifying the economies. The Group should consist of a maximum of 20 members tasked with diverse research fields with additional external two researchers well vest with the field of interest. The Regional Private Investors Coordination Team should focus on mobilizing resources and know-how on private sector development. The Team should comprise of major stakeholders in the private sector and the indigenous investors to devise measures to | Page 38 of 112

expand and effectively coordinate with the pressing needs in line with regional policies to ensure efficient production level to help in the diversification process of the economies. In line with Producers Association of the various RECs, tasked with producing the basic needs and other products that repatriate greater outflows. The Association should form a cartel of indigenous producers of diverse production capacity who can be heavily funded and supervised. The association determines the path to which FDI should be channeled to enhance trade. The Security Coordination Group should devise formal approaches in handling securityrelated issues. These should include all security agencies and stakeholders to ensure transparency in executing duties. The Coordination Group should be assigned with a quarterly briefing of security-related events and measures laid down to settle the unrest. The Implementation Committee should focus on the efficacy of monetary policy and initiate policies of welfare improving as well as reducing the leakages of institutional weakness for better policy effect on the economies. Also, the Committee should be charged with the settlement of trade disputes since an increase in trade volume lead to relatively tout de suite trade disputes and labour market pressures. Also, it should focus on integrating the labour markets of member-states. The Debt Evaluation and Strategic Committee should be charged with devising methods in attenuating the stock of debts and the rate at which the level of debt increases. The Committee should be in charge of foreign assets evaluation and devise strategies to increase the stock of foreign assets. Given this, the value of the currency will be assured of some level of stability. Also, instituting new debt management initiatives by allocating new debts to projects of long term benefits to the continent. The Aid and Investment Review Committee should monitor and evaluate the superlative motives behind the influx of foreign assistance and its implementation. Furthermore, the

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Committee should be charged with examining the channels of aid and investment and

execute strategies of benefits to the parties involved. The Common Market Committee should be tasked with evaluating exports to the memberstates and the rest of the world at large. The Committee should be tasked with the pricing of products originating from the continent. The Committee should be tasked with branding and adding value to existing raw materials. Tax Evaluation and Management Committee should be tasked with the formulation of tax

reforms, exposing the large informal sector by increasing the tax base, tax net and issuing tax compensation plans for countries adversely affected by integration. It should publish a report on domestic revenue collection and audit all tax authorities. Disease and Epidemic Control Unit should be tasked with all cases relating to the health of

persons, agricultural-related diseases, outbreaks, droughts, and related research into country-specific challenges in the health of persons, related to crops, and measures to control the spread of diseases. They should be tasked with forecasting the potential environmental changes and tasked with relevant solutions to attenuate the adverse effect of expected economic events. Migration Evaluation and Review Team should be tasked with the movement of the

citizenry. The Team should enhance regulation in the movement of people and duration spent within a country as well as all migration-related activities including database. This is necessary for policy purposes and dispensation of resources. The Infrastructural Evaluation Team should be responsible for evaluating the necessary loopholes in the infrastructural setting and devise measures for country-specific efforts towards bridging the gap. The Team should also be responsible for resolving border problems. In conjunction with the Central Bank, should create a Project Coordinating

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Group to ensure projects are undertaken with transparency and efficient corporation and

with a sub-Group evaluating the progress of the national projects. Regional and National Coordination Group should be tasked with the purchase of produce

from farmers either at farms or transported to the institution. This produce will be directed to manufacturers to transform and package the raw materials to prevent wastage. Additionally, the Group should be tasked with the pricing of lorry fares among members. The Group should be introduced to address issues on the medieval informal sectors that cannot be covered by the system and institute relevant non-government institutions to promote greater integration at the micro-level. The Group should provide greater incentive to expand and grow such small-scale businesses to be enrolled and covered on the regional base. Also, delineate measures of reducing transaction and production costs for these businesses to ensure competition. These institutions should be supported by credit packages to raise the level of output. The Summit should set the economic predilections for policy initiations to improve upon competitiveness and evaluate the convergence presented by the Monetary Institute for evaluation and policy dialogue. The Summit seeks to assemble all leaders in the region for prospective growth and evaluation report and the way forward for the continent. Currency union (Economic and Monetary Unions) Recent growth rates recorded from 2016 to 2019 shows that Africa failed to achieve the 8th Sustainable Development Goal of 7% growth target, therefore, substandard impact in the poverty reduction process with about 49.5million people expected to reach extreme poverty in Africa due to the lethal effect of the Corona Virus disease according African Development Bank (AfDB). In light of this, currency union is touted to improve economic stance and alleviate the level of poverty. In modern times, currency union have evolved and have a compassed effect on the sectors and institutions of the economies to stimulate growth. The main goal of pursuing currency union in Africa was to boost trade among member states. In this background, intra-regional trade in Africa was about 15.5% compared to 14.6% of Latin America and the Caribbean, 54% for America, 59.6% in

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Asia, and 68% for Europe (UNCTAD database, 2020). On average, the performance was way below the 54.5 % of developing countries of the world according to UNCTAD. According to the International Monetary Fund (IMF), there are currently four (4) currency unions in the world namely; The European Monetary Union (EMU), the West African Monetary and Economic Union (WAEMU), the Central Africa Economic and Monetary Community (CEMAC), and the Eastern Caribbean Currency Union (ECCU). In this background, there are two currency unions in Africa namely: the WAEMU and the CEMAC forming the CFA zone. The CFA zone consists of eight West African countries and six Central African countries namely Burkina Faso, Benin, Togo, Mali, Senegal, Cote d’Ivoire, Guinea Bissau, Niger, Togo, Gabon, Equatorial Guinea, Republic of Congo, Cameroon, and the Central African Republic. Empirically, the EMU was not a good candidate to form an Optimal Currency Area due to failure in the achievement of some of the criteria, however, adopting a common currency facilitated convergence (Komárek, 2002; Vrnáková and Bartušková, 2013). Also, studies have shown that the Eastern Caribbean Currency Union (ECCU) was an Optimal Currency Area (OCA) due to the use of the East Caribbean Dollar as a common currency (Zhao & Kim, 2014; Proczek, 2018). Other studies have shown that the CFA zone was not an Optimal Currency Area (Zhao & Kim, 2009). This is attributed to the pegged two CFA Franc (XOF and XAF) among members within each categorized monetary union and then pegged to the Euro which exerts external influence on the CFA. The external peg facilitates trade among the WAEMU and CEMAC, however, it also stimulates the demand for the foreign currency to trade which compounds the valuation of the foreign currency in the global foreign exchange market and exerts relatively downward pressure on the domestic currency. Therefore, the practice of a fixed exchange rate in a currency union retards the attainment of an Optimal Currency Area (OCA) and attenuates the gains for adopting a common currency. Also, the adoption of a common currency with sound macroeconomic fundamentals ensures the attainment of an OCA. In this background, the OCA shows the convergence of some variables and the potential of countries to converge when a currency union is established. In conclusion, the technical aspect of a currency is key to its performance among other currencies than its face quality. | Page 42 of 112

1.2 Background to forming a Currency Union for Africa The blueprint towards forming a currency union in Africa was the Abuja Treaty signed in 1991 and officially set up in 1997. The treaty, under the Lagos Plan of Action for Africa development in 1980, was set out to integrate African countries to stimulate trade flows with the creation of the various Regional Economic Communities (RECs). The RECs were the building blocks in the integration process as contrived by AU. The goal was to communicate the aims of AU on a regional basis to achieve a common currency for the entire region by 2028. The bond between AU and the Recs was mandated by the AU constitutive act and the Abuja treaty, and steered by the protocol on Relations between AU and RECs of 2008; and the Memorandum of Understanding (MoU) on Corporation in the Area of Peace and Security between the AU, the coordinating Mechanisms of the Regional Standby Bridges of Eastern and Northern Africa and the RECs.

The Protocol created a link between the African Economic Community and the RECs. The entire continent was divided into eight RECs by AU namely; East African Community (EAC), Economic Community of Central African States (ECCAS), Economic Community of West Africa States (ECOWAS), Arab Maghreb Union (UMA), Common Market for Eastern and Southern Africa (COMESA), Southern African Development Community (SADC), Community of Sahel-Saharan States (CENSAD) and Intergovernmental Authority on Development (IGAD). The creation of RECs led to easy implementation of regional economic transformation policies in Africa such as NEPAD in 2001 and the AU Agenda 2026 initiated in 2013 that seeks to accelerate past and present continental initiatives for sustainable development in the next 50 years. The first stage was the creation of the RECs to pursue policies towards integrating countries by 1999. The second was to harmonize and increase intraregional trade by 2007. The third stage was to create Free Trade Area (FTA) and Customs Union by 2017. The fourth stage was the African Customs Union by 2019. The fifth stage was to create a Common Market by 2023 and finally an African Economic and Monetary Union by 2028. Currently, there are several proposed currency unions in Africa using the RECs as the building blocks namely; the Economic Community of West African States (ECOWAS) of which the WAEMU is a part, the East African Monetary Union (EAMU), the Southern African Monetary Union amongst others. | Page 43 of 112

1.3 Trade in Africa The shadow economy constituted a large chunk of trade on the continent with price differential and relatively small production size the main attributing factor for smuggling and tax evasion among others. The numerous existing trade barriers accrued large revenue flows to the countries, however, impede greater trade flows. The cost of losing revenue due to the removal of trade barriers was a key impediment to intraregional trade agreements notably in countries with a relatively larger market. Figure 1. 3.1: Trend Analysis of intra-regional trade in Africa 20 18 16 14 12 10 8 6 4 0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


From figure 1, the trend shows that intra-regional trade has been consistently below 20% of the total trade of the continent. This is attributed to the greater trade costs associated with trading with one another as compared to advanced countries and the poor diversification of the economies among others. Figure 1.3.2: Trend Analysis of Africa Trade with the Rest of the World 700000 600000 500000 400000 300000 200000 100000 0 WORLD EUROPE

Source: World Trade Organization

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From figure 2, Africa trade about two times more with Europe than within its members from 2000 to 2017. In 2008, the international financial crisis took a toll on the volume of trade affecting trade patterns and that shows the decline in the volume of trade in the world as a whole. From 2000-2017, Europe remained the most important trade partner followed by Asia and the United State of America respectively. From 2012, the level of trade among African countries was higher compared to the United States of America. The decline in trade of the United States with Africa could have a relative adverse effect on the currency performance of African countries. This could partly account for the worsening performance of the currencies against the US dollar due to relatively greater unilateral demand for the dollar by African countries to trade with the rest of the world. 1.4 Comparative Analysis of Existing Currency Union The CFA Zone, the Eastern Caribbean Currency Union (ECCU), and the European Monetary

Union (EMU) The CFA zone is the oldest currency union in the world and notable for stable macroeconomic performance in Africa (Gulde & Tsangarides, 2008; Abban, 2020a). The France African colonies known to be the Colonies of Françaises d’Afrique franc (CFA franc) was renamed to ‘Communauté Financière Africaine’ in West Africa and ‘Coopération Financière en Afrique Centrale’ in the Central African states after the colonies gained independence. Formerly, The CFA zone was a much larger geographical coverage compared to its current membership, however, some countries opted out for several other reasons. Saint Pierre and Miquelon islands, the Reunion Island, Comoros, Mauritania, Equatorial Guinea, Algeria, Morocco, and Tunisia were a good case in point (BlochLaine et al., 1956; St. Mark, 1964; Yansane 1984, Neurrisse 1987, Vizy1989). Currently, the CFA zone is made of 14 countries and the Islamic Republic of Comoros, characterized by two independent currencies; XOF and XAF dependent on the treaty with France. The conditions about the agreement with the WAEMU countries were; at least 20% of sight liability to be insured by foreign exchange reserves and 50% of foreign exchange reserves to be held in operations account in the French treasury to allow for the convertibility of the CFA to the Euro. The Eastern Caribbean Currency Union (ECCU) is made of eight island countries namely Anguilla, Antigua and Barbuda, Dominica, | Page 45 of 112

Grenada, Montserrat, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. It is the smallest currency union in the world with a population of less than a million people as compared to the CFA Zone and the EMU (IMF, 2013). The European Monetary Union (EMU) is the largest currency union in the world made up of 19 countries forming the Eurozone namely Austria, Belgium, Cyprus, Estonia, France, Finland, Germany, Ireland, Greece, Latvia, Lithuania, Italy, Ireland, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, and Spain. Comparatively, the CFA currencies (XOF and XAF) of the monetary unions, issued by the BCEAO and BEAC, are pegged against members before pegged to the Euro, which operates a fully convertible currency supervised by European Central Bank. The Eastern Caribbean Currency Union (ECCU) uses the East Caribbean dollar, issued and supervised by the Eastern Caribbean Central Bank which is pegged to the US dollar. Geographically, the far-flung members of the WAEMU from the CEMAC hitherto having non-binding trade policies, below par connectivity and non-members in between the two monetary zones reduced the purported gains from currency union membership as compared to EMU whose members are closely connected. In light of the argument, the ECCU members experience fragmentation which poses logical challenges in facilitating trade. Additionally, the CFA zone is a much looser political union due to the relative political instability and weak governance with substandard political binding laws in accountability, control of corruption, and a unified political decision among others as compared to EMU. The ECCU has achieved some appreciable degree of a political union even though more complex in nature. Additionally, the CFA zone was able to navigate asymmetric shocks than the EMU due to the relatively smaller size of the countries and the restrictiveness to tremendously borrow to finance budget. The island countries of ECCU are exposed to shocks notable are interminable natural disasters and easily navigate to avoid the collapse of the union. 1.5 Measuring the Efficacy of an Economic Policy (Abban Policy Weighted Index (APWI))

In Africa and the world at large, measuring the efficacy of a policy is a major topic of discourse. What makes a very good economic policy? The incumbent governments are often evaluated based on their promises made through their manifestos. However, some | Page 46 of 112

policies have a much more grounded economic effect on the economy as compared to others therefore evaluating per promises is a necessary but insufficient condition. A strong economic policy corrects economic distortions of the past, builds capacity in the present, and has the potential to stimulate economic growth and development in the future. In this background, a policy that seeks to address past distortions but does not build capacity should be weighed 1. A policy that corrects past economic distortions and builds capacity ought to be weighed 2. Finally, a policy that binds all three criteria ought to be weighed 3. If the policy corrected a past economic distortion and led to economic growth, it is still weighted 1 because it better exposed the economy. Furthermore, policies that were promised but renege ought to be weighted as well. Therefore, the sum of all policies multiplied by their weights divided by the number of policies then compared to a benchmark. To develop a strong benchmark, there is the need to evaluate per the initiated policies of the two successive past governments of the country. 1.6 Proposed Currency Unions in Africa and their performance based on the OCA Criteria 1.6.1. Economic Community Of West African States (ECOWAS)



SirehJallow( VAR and 2013) cointegration

Mati et al (2019)

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Emphasis Results (OCA Criteria) Price similarity There is and shocks convergence in price and asymmetric shocks

Author’s Remark VAR showed not an OCA, Cointegration showed otherwise.

Proposed Solution Macroeconomic convergence, a common currency, credit transfers, intense trade through diversification, Price Similarity Asymmetry of Not an OCA Intensifying and Shocks shocks trade to reduce external shocks

accompanied with sound monetary and fiscal policies Egbuna et al An OCA (2019) index

ECOWAS should adopt a gradualist approach in the formation of the currency union therefore not an OCA Kamara cluster analysis Similarities ( Countries are Not an OCA (2015) price and heterogeneous shocks) in diverse ways and intra-trade is not adequate to yield the benefits expected from the union. Habimana et Waveletspectra Not an OCA The al. (2020) clustering Business cycle ECOWAS synchronization should incorporate a risk-sharing mechanism

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Real convergence (business cycle synchronization)

Some countries exhibit strong convergence, others moderate, and some exhibits slow convergence

Intensifying trade through diversification of the economies

Countries of greater external shocks will not form an OCA unless the external influence is cushioned by internal arrangements to stimulate trade Empowering the possible periphery countries to increase their involvement in international

Abban & OforiAbebrese (2019)

The Gravity model of international trade


trade through even distribution of credit facilities and skilled personnel Trade Facilitate Consolidate creation nominal buffers and therefore convergence ensure sound OCA ex-post and monetary and provid fiscal policies e buffers to pursue to currency reduce convertibility exchange rate volatility

1.6.2. East African Community (EAC)



Redda (2017)

et al. Descriptive and Comparative Analysis

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Emphasis Results (OCA Criteria) Trade Openness Members are not open to international trade

Author’s Remark Therefore not an OCA

Proposed Solution This is a policy inducing effect. The need to practice sound trade practices, eliminate nontariff barriers, sound macroeconomic

execution, and strong political will

Cárcel (2014)

et al. Fractional Integration

Caporale et al GPPP (2018)

Muthui (2016)


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There is heterogeneity in the inflation rate.

Therefore, Contrarily, do not forming a form an currency union OCA will eliminate inflation bias to stimulate stability.

Business cycle Cointegration OCA is Diversification synchronization of achievable of the exchang in the economies will e formation induce greater rates of the trade flows currency hitherto union removal of all barriers to trade Exchange rate The members Not an Currency union are not OCA eliminates cointegrated. exchange rate Also, there is a volatility so the strong political possibility of will to form a forming currency union an OCA

Nyamrunda (2013)

Gravity model Structural EAC responds Is an of international Harmonization symmetrically OCA trade and responses to to shocks, shocks

Intensifying trade flows will speed up convergence

Gitimi (2018) Macroeconomic Inflation (price) a long-run OCA is Stringent Convergence convergence achievable policies will Criteria among ensure (MCC) and members convergence in GPPP the short-run Umulisa The Gravity Trade flows, The need for OCA is Sound (2020) Model of business cycle relatively achievable Macroeconomic international synchronization, greater business and EAC fundamentals trade inflation cycle has a will inure synchronization positive greater benefits and to the significant members. effect on intraregional trade 1.6.3 Southern Africa Development Community (SADC)


Methodology Emphasis (OCA Criteria) Zerihun & Generalized Price, exchange Breitenbach Purchasing rate, Business (2017) Power Cycle Parity Synchronization, (GPPP) and shocks

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Author’s Remark Slow OCA is convergence achievable among when Angola memberstates and and the Mauritiu potential of s are excluded posing unstable

Proposed Solutions Diversification of the economies to facilitate the production of import substitution goods

macroeconomic fundamentals

Redda et al. Descriptive Trade Openness (2017) and Comparative Analysis

Nzimande GMM & Ngalawa (2017)

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Members are open to international trade

Business Cycle The study finds Synchronization out that intensifying trade, sound monetary and fiscal policy will ensure business cycle synchronization. The study also found out that financial integration and oil prices harmed

Therefore the possibility of attaining an OCA

Further Integration of members in the financial market, stringent monetary and fiscal policies, and diversification of the economy

Business Cycle Synchronization can be achieved ex-post

Diversification of the economy and removal of all barriers to trade

the business cycle.


Generalized Inflation rates & Purchasing and Exchange Muzindusti Power rates (2017) Parity (GPPP)

There is longrun OCA is convergence of achievable in real exchange rate due to similarity in macroeconomic fundamentals

Macroeconomic Restrain, financial buffers, and intensifying trade by removing barriers

2.0 LITERATURE REVIEW 2.1 Optimal Currency Area (OCA)

The Optimal Currency Area (OCA) theory can be attributed to Mundell (1961) and McKinnon (1963). The theory postulates that countries with high labour mobility, a high degree of openness, substantial product diversification, sufficient flexible price and wage, effective monetary policy, similar inflation rates, and the zeal to abandon their currencies will benefit from forming a currency union. Mundell postulated that a common currency reduces transaction costs leading to trade creation. High factor mobility especially labour mobility among the countries was key in forming an OCA in a fixed exchange rate regime. McKinnon (1963) argued that the degree of openness as a relationship between tradable and non-tradable is crucial in forming an OCA. The more economies are opened to one another, the higher the tendency of forming an optimal area. | Page 53 of 112

For a currency area to be optimal, Mundell (1961) argued that asymmetric shocks can be nullified with free labour mobility by liberalizing factor markets in the area. McKinnon (1963) argues an OCA as a region with a common currency and within which monetary policies, fiscal policies, and flexible exchange rates can address issues related to price stability, employment, and international payment which are conflicting. He suggested the need for the economies to be well integrated to reduce the exchange rate effect. He investigated the consequence of the size of currency unions and argued that small nations are more liable to trade and have lesser nominal rigidities. Therefore, suitable for the formation of a currency union. Kenen (1969) introduced product diversification as an important criterion for an OCA. He argued that diversity in products of the countries and the number of single product regions in a currency union is most relevant to form OCA as compared to labour mobility. Product diversity is a key factor for labour to move within a region. He further argues that when a region has a well-diversified export sector and homogenous labour with high mobility, there is a tendency for the region to form an OCA. Mundell (1961) concentrated on the cost involved in joining a currency union whereas McKinnon (1963) and Kenen (1969) focused on the conditions for enhancing the benefit for an Optimal Currency Area. The OCA focuses on the balance between the benefit of reduced trade cost and the cost of abandoning monetary sovereignty and business cycle synchronization of the member states. The theory concludes that there is a need to experience symmetric reactions to external shocks to lower the cost of regionally coordinated policies. Mundell (1973) argued that using a common currency may help an area to be optimal. This will reduce unsynchronized economic shocks leading to the creation of an optimal area. Mundell further posits that purchasing power parities should exhibit steadiness overtime. Thus, with the free movement of capital, there is the tendency of attaining an OCA. Countries in fulfillment of the OCA criteria benefit from reduced transaction costs, price transparency, deepened and integrated money and capital markets, elimination of extreme nationalism, healthy competition to enhance trade through the facilitation of export diversification, and induce FDI as a result of sound macroeconomic indicators. The cost of forming a currency union per the OCA is; the inability of countries to respond to idiosyncratic shocks that worsen the economic situation of the area. The ability to | Page 54 of 112

overcome external shocks was a factor to evaluate when introducing a new currency. To add up, the loss of monetary sovereignty by member countries and the mechanism of the exchange rate which is dependent on the effectiveness of monetary policies. The OCA does not account for the political influence in the formation of a currency union. Thus, there are other benefits to currency union than just trade. Frankel and Rose (1997) argued that trade enhancement as a result of OCA will have two effects: either an increase in industrial specialization due to comparative advantage or increased business cycle correlation. The study posits business cycle synchronization is an important criterion in evaluating an OCA and it can be achieved ex-post. The study further posits that trade openness and correlation move hand in hand. Frankel (1999) based on the Endogeneity of OCA argued that income and openness can be stimulated with policies. Thus, a country below the OCA curve can move to the right of the line with trade integration which would increase the income level to achieve OCA. Calvo and Reinhart (2002) argued that if a country cannot use monetary policy adequately then the loss of monetary policy cost will not be significant. De Grawe and Mongelli (2005) argued that countries with separate labour market institutions would not form an OCA. The benefit of an Optimal Currency Area is realized from the microeconomic base by reducing trade cost hitherto currency and exchange rate risk whereas the cost of joining the union is realized at the macro-level (De Grawe and Mongelli, 2005). Therefore, the optimal currency area criteria were set out to evaluate conditions that will enhance the benefit and reduce the cost of adopting a common currency. De Grauwe and Mongelli (2005) argued that monetary integration will not lead to only trade but also labour and financial market integration. The OCA emanated from the argument of the fixed and floating exchange rate but recent arguments have been raised for the reconsideration of the theory. To begin with, the theory postulates that in an area of free labour and capital mobility across regions, the area is optimal for the creation of a currency union. The free movement of capital ruins the exchange rate as a useful tool in stabilizing external disequilibria but rather it is a target of destabilizing speculative capital movements and thus a source of large asymmetric shocks | Page 55 of 112

(Mundell, 1973). To simply put, the exchange rate is less effective in addressing an external shock within the area using a fixed exchange rate regime. Secondly, Currency union turns to integrate the capital markets of member states serving as an insurance mechanism against asymmetric shocks. (Mundell, 1973). Thirdly, a country’s monetary policy can be enhanced when attached to a low inflation anchor country (Talvas, 1993; 673-677). Fourthly, monetarism argues that activist monetary policies are the only source of instability, in the long run, governments cannot stabilize their economy through monetary policies (DeGrawe, 2006; 715). Fifthly, the OCA prediction of the Eurozone as not optimal even though members achieved the convergence criteria took a toll on the theory. Rogoff (2005) argues that the Eurozone is politically optimal but not economically. Also, the OCA criteria do not have a unified framework for estimating the formation of a currency union. There is no unanimity for the weight of each criterion and leads to inconclusive analysis (Talvas, 1993). Likewise, the OCA draws strong conclusions from several criteria to evaluate the feasibility of a currency union (Willet et al, 2007). Finally, the Endogeneity of OCA argues countries in an area can be an OCA ex-post when they form a currency union even though it was not ex-ante. Therefore, the need for reevaluation of the OCA for the above arguments. The floating exchange rate does little to help achieve monetary targets due to exchange rate volatility and currency depreciation. In light of this, currency union yields more benefits compared to the fixed exchange rate. The OCA criteria are best used as a measure for countries who are already trading with one another and competing in international trade with infrastructures in place to facilitate trade. In this background, the business cycles will have a greater tendency to synchronize. Moreover, empirical studies using the OCA criteria showed the European Monetary Union was not an Optimal Currency Area, before currency union (Komárek, 2002; Vrnáková and Bartušková, 2013). Despite the EMU, not an OCA, the currency union stimulated trade flows among member states (UNCTAD database, 2018). A recent evaluation of the EMU countries based on OCA criteria showed countries were converging with the introduction of the Euro (Rose, 2008; Fürrutter, 2012; Crowley 2013). In this background, the OCA criteria will show varying results about countries at different stages of development irrespective of countries developed or developing. | Page 56 of 112

Comparatively, countries at different stages of development will not have a synchronized business cycle due to their economic structures. If developing countries can adopt import substitution policies and induce cross-country FDI, inflation can easily be attenuated within the member states. There is an exigency for developing countries to integrate further by adopting a common currency for several reasons. These assertions show there are flaws in using the OCA criteria to evaluate the feasibility of currency union on trade. In this context, the stage of development of countries also provides an in-depth criterion for currency union formation. 2.2 Theory on Exchange Rate Volatility Exchange rate volatility shows the level of risk involved with changes in the exchange rate. Exchange rate volatility is associated with either rise or fall in the level of exports depending on the assumptions of the variable. Conventionally, exchange rate volatility is argued to hurt exports since it increases the risk or shock involved in international trade. The prospective gains from international trade by firms are uncertain due to exchange rate volatility due to currency risk (Broll, 1994, 1995). Moreover, even with well-developed forward markets for some currencies, exchange rate volatility cannot be eliminated since it affects exporting firms in diverse channels of trade. An increase in exchange rate volatility increases the risk involved in trading, therefore, reduces the volume of trade with riskaverse firms. Contrarily, another theory on exchange rate volatility on exports shows even in the face of risk associated with volatility, it presents an opportunity for firms to maximize profits. In this background, exchange rate volatility can have a positive impact on the volume of trade. The option theory stipulates in alignment that firms with the option to export are better off when the exchange rate is volatile (De Grawe, 1992). 2.3 Types of Currency Areas The choice of a currency union is dependent on the currency area and the prevailing circumstances of the countries. There are three main types of currency union namely; (i) Informal currency union (ii) Formal currency union and (iii) Formal with a Common Policy

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An informal currency union is a type of currency union whereby a country unilateral adopt a foreign currency. The currency union establishes an international monetary system characterized by pegged exchange rates. The country pegging to an anchor currency benefits based on an aligned circumstance with the anchor currency purchasing power reasonably stable. The adopting country must be a major trading partner with the anchor country and also trading activities indexed to anchor currency. The trade relation should be strong to eliminate barriers of trade between the two countries so that the pegging country is less exposed to external shocks otherwise speculative attacks may lead to sharp devaluation and such expectation would generate high-interest rates and inflation that would reduce investment, therefore, dampen economic growth. Examples are Liberia and Zimbabwe. A formal currency union is when a country adopts a foreign currency due to arrangements between the two countries. The currency union has a permanently fixed exchange rate with strict coordination of policies to unify monetary policies among member countries. Permanently fixing exchange rates necessitate monetary authorities to deliver their exclusive right to a common monetary authority by influencing the primary credit of central banks. Under this system, the domestic currencies of the member countries are allowed to circulate with some transaction cost. The benefit of joining such a currency union is small relative to the third type of currency union. An example is the pegging of Lesotho, Namibia, and Kingdom of Eswatini to the South African rand. Formal with a common policy is when countries through international treaties adopt a common monetary policy and authority for the issue of the single currency with the establishment of an independent central bank that oversees the activities of the national banks. The central bank would oversee the national banks’ operational and human resources without incurring the price of using all resources available. The countries turn to benefit tremendously from adopting the union such as the unification of interest rate, reduction of investment risk, and considerable savings as a result of a reduction in transaction cost which stimulates economic growth. An example is the WAEMU and CEMAC.

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2.4 Empirical Literature Review

Cárcel et al. (2014) examined the feasibility of currency union in the East African Community (EAC) using monthly inflation rate data spanning from January 2004 to December 2013. The methodology deployed in the study was a fractional integration approach on inflation rate notably the Engle and Granger’s (1987) and Gil-Alana (2003) methodology. The results showed that there is heterogeneity in the inflation rate. Therefore, it is not a possible OCA. Harvey & Cushing (2015) undertook a study to examine whether the WAMZ is a common currency area using monthly data from February 1987 to April 2011 for five countries in the zone except for Liberia. The methodology used in the study was Structural VAR of real exchange rates, real growth, and price levels. The study concludes that each country experience different shocks and countries do not respond symmetrically to external shocks therefore not feasible to form a monetary union. Rametsi (2015) examined the possibility of SACU as an Optimal Currency Area (OCA). The data spanned from 1980 to 2015. The methodology used in the study was the Error Correction Model, central tendencies, and standard deviation to establish a relationship between real exchange rate, real GDP, the external value of the currency, and domestic value of the currency (inflation). The results showed that the error correction terms were statistically negative. The effect was that the cost and benefit of forming a currency union were based on how integrated the proposed members are to one another. The study further showed that there was a convergence of macroeconomic indicators therefore there is a possibility that the trade bloc is an Optimal Currency Area and can proceed with adopting a common policy. Bakoup & Ndoye (2016) assert key players such as Cote D’Ivoire, Ghana, Nigeria, Guinea, and Senegal are most relevant for the West Africa Monetary Union to be established. These countries can take up the leadership role in the establishment of the union. Mensah (2015) analyzed trade of West Africa Economic and Monetary union using data from 2002 to 2013. The Optimal Currency Area criteria were adopted to determine | Page 59 of 112

whether the WAMZ form an Optimal Currency Area using data sourced for five WAMZ countries. The study concludes that based on trade WAMZ is not an Optimal Currency Area but with convergence in Real GDP growth, monetary policy rate, and inflation. Ndiaye & Xu (2016) investigated the impact of direct foreign investment on WAEMU. The study developed a theoretical model of investment using panel data from 1990 to 2012. The study showed that FDI has a positive impact on economic growth in WAEMU. Thus, FDI has led to trade and investment in the zone attributed to trade liberation and creating an enabling environment. This a clear indication of the significance of FDI in a monetary union in West Africa. Asongu et al. (2017) listed a broad survey of literature on the proposed African Monetary Union and delineated the advances on the status quo. The study adopted a cluster analysis, disaggregating panel, and shocks to the business cycle. The result showed that different methodologies provide conflicting findings. Cham (2016) examined monetary integration and the possibility of FDI flows in the WAMZ using data from 1980 to 2013. The methodology used in the study was Fully Modified Ordinary Least Squares (FMOLS) and Ordinary Least Squares (OLS). The study concludes that monetary union has a positive impact on FDI inflow. Muthui et al., (2016) analyzed the possibility of East Africa Community (EAC) monetary integration using data span from 1996 to 2014. The results showed that there is no cointegration between countries therefore the EAC does not form an OCA hence monetary union will come at greater costs. Bah et al (2017) reflect on the strong regional trade institutions of West Africa to the weak trade institutions of the current era from the Empire hood to the current state of affairs. The study used an augmented gravity model of trade to account for import duty as a measure of trade liberation from 1998 to 2011 by using the dynamic panel technique for twelve countries in the region. The result shows that a reduction in the import duties on primary and manufactured products enhance the volume of intra trade except in | Page 60 of 112

Agriculture. Thus, intra-regional trade in West Africa is less sensitive to changes in the agricultural import tariffs. The study further shows that current institutional trade barriers can be eliminated to allow the free flow of goods and services in West Africa. The study showed the role the regional trade institutions played to facilitate trade that has shaped the current trade pattern of the region. Okom & Ugbe (2017) delineate the free movement of goods and trade liberation in West Africa showing the current blocks to the policy efficiency and efforts undertaken by ECOWAS to fully reap the benefit of the policy in attaining a common market. It emphasized that ECOWAS had implemented the policies and that the need for members to adhere to the standards through the willingness and zeal to converge to ensure a large trading bloc. The paper posits that Nigeria been the largest economy should embark on monetary and fiscal discipline to aid in the monetary union coming into fusion. Redda et al., (2017) analyzed the feasibility of monetary union in the Southern Africa Development Community (SADC) and East Africa Community (EAC) using data span from 1986 to 2015. The results showed that countries in EAC have not attained the trade openness criterion therefore not liable to maximize the benefits of currency union hitherto not an OCA. Chlond (2018) assessed hypothetically the possibility of using the rand as the common currency in the Southern Africa Customs Union using data spanning from 1960 to 2016. The study investigated the possible challenges and benefits of forming a monetary union in SACU and the asymmetry of shocks among members. The study adopted a structural VAR to measure the asymmetry of shocks among members. The results showed that forming a monetary union will come at a greater cost to Namibia, Lesotho, and Swaziland except for South Africa since the domestic component are high for all small CMA members. This indicates that economic shocks hit the area quite asymmetrically so that it is challenging for a common central bank to accommodate all economies using one monetary policy due to regional and global components estimated low. To conclude, the study showed that SACU adopting a common currency will not lead to trade. Caporale et al. (2018) assessed the prospects of a monetary union in the East Africa Community using a monthly Real Exchange rate from 1990 to 2015. The results showed | Page 61 of 112

that there exists a long-run integration between the members therefore a monetary union is feasible in the East Africa Community. Gitimi (2018) examined the feasibility of adopting a common currency in the East Africa Community (EAC) using quarterly data span from 2000 to 2015. The results showed that there was a long-run convergence among members of EAC therefore Eats Africa Community is an optimal currency area. Preis & Rappe (2019) assessed the optimality of the East Africa Community in forming an Optimal Currency Area (OCA) using a data span from 1995 to 2017. The results showed that there exists an asymmetry of shocks, structural differences, and attainable yet unsustainable nominal convergence criteria, therefore, miniature evidence for EAC forming an OCA. Abban and Ofori-Abebrese (2019) estimated the prospect of ECOWAS Currency union on intra-regional trade using data spanning from 2000 to 2017. The methodology used was the gravity model of international trade which was estimated using the Poisson Pseudo Maximum Likelihood (PPML). The result showed that adopting a common currency will lead to trade. The study concludes that there is greater trade potential and the exigency to fast track attaining the macroeconomic convergence. Abban (2020) delineated the macroeconomic convergence criteria of the Economic Community of West African States (ECOWAS). The study showed the level of convergence using averages, estimated the realistic targets, and emphasized the need for trade and institutional convergence. The study stipulated the main hindrance to trade in the ECOWAS and suggested some solutions to curb the ills. The study showed that in periods of shocks there is inflation dispersion. The study concludes that, on average, countries that use a common currency (WAEMU) have sound macroeconomic indicators than countries using sovereign currencies (WAMZ) in the ECOWAS. Abban (2020) investigated the role of institutions and infrastructure on trade among members of the ECOWAS using a dataset from 2000 to 2017. The study used an | Page 62 of 112

augmented gravity model of international trade which was estimated with the Poisson Pseudo Maximum Likelihood (PPML). The study used six institutional indicators from the World Development Indicators. The results showed that Political Stability and Rule of Law facilitated intra-regional trade whereas Corruption Control, Regulatory Quality, and Government Effectiveness harm trade. The study concludes on the need for a new institutional framework to curb the ills among members. Abban (2020) used an augmented gravity model of international trade to estimate the prospect of a common currency on trade in the Southern Africa Customs Union (SACU) using a dataset spanning from 2000 to 2017. The estimation technique used was the Poisson Pseudo Maximum Likelihood (PPML). The results showed that adopting a common currency will lead to trade. The study concludes that trade and transport infrastructure and appropriate institutions are prerequisites in maximizing the gains from the formation of a currency union. Abban (2020) estimated the prospect of the East Africa Community (EAC) currency union on trade using the gravity model of international trade. The study used a data spanning from 2000 to 2017 and the Poisson Pseudo Maximum Likelihood (PPML) estimation technique to estimate the model. The result showed that forming a currency union will lead to trade. The study concludes that adopting a common currency is superlative to the presence of a convertible currency. Therefore, adopting a common currency will lead to trade in East African Community (EAC). Abban (2020) investigated the impact of institutions, infrastructure, East African Community (EAC) membership of Burundi and Rwanda on trade in East African Community (EAC) using data span of 18 years (2000-2017). The augmented gravity model of international trade was estimated using the Poisson Pseudo Maximum Likelihood (PPML). The result showed that institutions are not significantly contributing to trade while infrastructure affected trade. The study further showed that Burundi and Rwanda gained from EAC membership. 3.0 METHODOLOGY 3.1 DEVELOPING A MODEL FOR CURRENCY UNION AS A PANACEA

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STEP 1 Existing studies have shown the potential benefits from currency union feasibility on trade. In this background, developing countries have to empirically test the impact of those variables on trade to know how significant the variables have been in stimulating trade and economic growth. In response, a new policy variable has to be developed if the variable does not have a positive significant impact on trade before the formation of a currency union. However, if the variable does have a significant impact, there is a relatively greater potential gain with the formation of a currency union. A granger causality test has to be further undertaken to know the existing relationship between trade and economic growth. If there exists a positive relationship, trade can be used as the dependent variable. However, if there exists a negative or insignificant relationship, there is a need to use economic growth as the dependent variable. STEP 2 Test for the Optimal Currency Area (OCA) criteria and initiate policies in the attainment of the OCA. STEP 3 Test for Optimal Cost Phase (OCP) criteria to deduce if the cost of using sovereign currency outweighs the costs of forming a currency union. The outcome will show the exigency for currency union feasibility. STEP 4 Test the prospect of currency union on trade using the gravity model on international trade. STEP 5 The developed policy framework for the policy on currency union should be implemented to test countries wit in compliance with macroeconomic restrain. The convergence can be used tested after the attainment of sound macroeconomic stability. Also, the need to test the political and economic environment on trade or economic growth to initiate policies that can adversely affect the free movement of people and

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ensure safe and sound security. This is to curb any potential threat and develop strong political ties among member-states. 4.0 EXPECTATION OF RESULTS 4.1 Expected Results STEP 1 All the variables are expected to have a positive impact on trade and economic growth STEP 2 Degree 1

The OCA criteria such as high labour mobility and a high degree of openness are policy stimulating in the relatively short-run. The two criteria are attainable for developing

countries. However, the criterion for high labour mobility will not be fully-fledged due to poor economic diversification. Degree 2 The effective monetary policy requires intense coordination of policies to unearth the large informal sector. It requires macroeconomic restrain. Also, Price and Wage will equalize over time and be much flexible with an effective monetary policy. In light of this, measuring currency union feasibility based on macroeconomic convergence using inflation ex-ante fails since exchange rate compounds to inflationary pressures hitherto stringent measures to ensure discipline against inflation in a currency union. The two criteria will require time to be achieved therefore not feasible to test currency union feasibility for a developing country. Degree 3 Substantial Product diversification will not easily be attained by developing countries in the same geographical jurisdiction because of the greater dependence on primary exports and similar production structures. As a result, intra-trade is relatively low therefore difficult for the business cycle to synchronize. This requires a laid out diversification road map of member-states. The criterion will not be feasible to test currency union for developing countries, however, it will spill out the targets to be achieved to form an OCA. | Page 65 of 112

4.2 Background to Optimal Cost Phase (OCP) Developed countries with greater contribution to world trade are liable to use sovereign currencies compared to developing countries. Due to the other incentives of a currency union, advanced countries also enjoy the membership of the union but are exposed to a greater risk of shocks. The initial non-existing mechanism to check the compliance and borrowing of members in the initial stages of the implemented policy of currency union yielded a great negative externality on the economies of the world. The main attributing factor for the crises in the European Monetary Union was the large public sectors heavily financed by external debts and the attractiveness to borrow from the international market. Moreover, empirical studies using the OCA criteria showed the European Monetary Union was not an Optimal Currency Area, before currency union (Komárek, 2002; Vrnáková and Bartušková, 2013). Despite the EMU, not an OCA, the currency union stimulated trade flows among member states (UNCTAD database, 2018). A recent evaluation of the EMU countries based on OCA criteria showed countries were converging with the introduction of the Euro (Rose, 2008; Fürrutter, 2012; Crowley 2013). These assertions show there are flaws in using the OCA criteria to evaluate the feasibility of currency union on trade. In this context, the stage of development of countries also provides an in-depth criterion for currency union formation. 4.2.1 Introduction of the Intuition ‘OPTIMAL COST PHASE (OCP)’ Intuitively, the condition upon which a country will opt to join a currency union depends on the cost of using the sovereign currency (based on historical data and the prospective events in country-specific) as compared to the cost (shocks) associated with joining a currency union. In this background, a developing country will join a currency union, only when the cost of using its sovereign currency would be higher as compared to the cost of joining a currency union. Thus, if the state of the economic and political environment keeps worsening per historical events and has the tendency to pose danger in the future, there is the need to integrate further with other countries to enhance economic growth. Comparatively, the OCA criteria compare the cost and benefits of joining a currency union strictly showing the set-out conditions are prerequisites to stimulate trade.

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However, the set out nominal convergence has relegated the OCA criteria as a measure for the feasibility of currency union. Additionally, there are several other conditions on trade flows stimulation such as policy-oriented trade flows when potential is not fully tapped which will not be captured by the OCA ex-ante. Currency union membership can help unleash greater trade potential. Also, developing countries are highly vulnerable to shocks due to the use of sovereign currencies and poor diversification of the economies hitherto high dependence on the western world, so using shocks and similarity of the economic structure as a yardstick for ex-ante currency union would not be suitable. Shocks can be nullified with increased trade flows and the provision of credit facilities by adopting a currency union with a common policy. Additionally, empirical studies have shown that developing countries easily navigate through shocks compared to developed countries in a currency union. More so, forming a currency union with common policy is a means of nullifying shocks across member-states hence reducing the high dependence on foreign partners and shifting the reliance to domestic producers. Using a sovereign currency as a developing country impedes development since it culminates as a greater barrier to trade and increase the cost involved in international trade. In this context, countries with greater trade potential and the large informal sector will culminate in the gains from trade when a currency union is formed. Currency union is a major step towards the economic transformation of struggling economies. The intuition seeks to measure the cost of using existing currency, then evaluate if there is a need for the currency to be substituted with another. If the cost of using the existing currency is high compared to the cost of joining a currency union, then the countries have the incentive to join a union since the benefits of a currency union will improve their economic stance. The evaluation of the existing currency cost should comprise institutional quality (economic and political), regional growth, environmental factors depending on the contribution to GDP, human resource quality, size of the informal sector, trade barriers, and trade intensity based on potential whereas the cost of the currency union can be computed using some OCA criteria. If OCP is greater than OCA, then adopting a common currency will improve economic prospects.

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Recent Endogeneity growth model estimates depict human quality easily stimulates economic growth. The OCA criteria for measuring real convergence such as business cycle synchronization, product diversification, and similarity in the industrial structure are not suitable for the feasibility of developing countries’ currency union. These criteria can be attained with a well-laid criteria road map for diversifying the economies and removal of trade barriers. Also, the Endogeneity of the OCA postulates the attainment of these criteria ex-post. Countries with well-developed infrastructure and human capacity will only attain these criteria ex-ante. The striking advantage of developing countries in forming a currency union has to do with relatively lesser nominal rigidities, relatively small public sectors compared to EMU, unattractiveness to heavily borrow from the international market, greater trade potential, and elimination of trade and non-trade barriers among others. However, reduction in currency risk, exchange rate risk and inflation risk will lower the country’s cost of borrowing from the international market hence enhanced gains from trade. Furthermore, developing countries in a currency union are most likely to navigate through shocks easily compared to developed countries. Also, savings will be very large when transaction cost is reduced compared to EMU countries due to greater trade barriers in developing countries hitherto greater trade potential. Theoretically, capital would flow from region of abundance to region where capital is most needed. Thus, it will induce Foreign Direct Investment (FDI) from member-states by when policies across the region assure business confidence. Additionally, the money and capital market deepen with intense economic policy integration. Also, investor confidence can easily be enhanced by ensuring exchange rate stability across the region since risks associated with doing business is reduced. Evaluating the EMU based on the Optimal Cost Phase (OCP), the cost of countries in the European Monetary Union not integrating further to form a currency union was the tendency of trade disputes among members, the adverse effect of sovereign currencies on international trade, and extreme nationalism which could have cost the long-term growth of the continent. Moreover, the prevention of competitive devaluation of currencies and unwholesome speculations that would adversely affect trade. In conclusion, the intuition stipulates that the cost analysis of the existing conditions pertained to using sovereign | Page 68 of 112

currency compared to the cost of joining a currency union is superlative to using the cost and benefit analysis of the OCA. Notwithstanding, some OCA criteria are suitable for currency union evaluation. The OCP could serve as the link between ex-ante OCA and Endogeneity of OCA. 4.2.2 Steps for Optimal Cost Phase (OCP) 1. To set out the realistic nominal convergence criteria, there is the need to use the average of the yearly average of inflation, gross reserves, budget deficit, public debts per GDP, Central Bank financing of government expenditure among others. 2. Initiate policy on the free movement of people, goods, and capital 3. The roadmap for diversifying the economies to form the currency union 4. The rollout of the institutional policy framework to ensure transparency in the system. 5. To investigate the effect of political variables, security, tourism, migration, human resource quality, Foreign Direct Investment (FDI), among others on trade. 6. Estimation of the trade potential for member-states 7. To investigate the role of the primary sector on trade for the selected countries to know its intensity on trade compared to the manufacturing and service sector and the geographical fundamentals 8. The size of the informal sector and the size of foreign investors per total businesses in the countries and 9. The potential gain from the integrated financial market and suggested diverse portfolios to be listed STEP 4 Currency Union should have a positive effect on trade. Additionally, the size of domestic firms to foreign firms is a prerequisite to evaluate the capacity of the indigenous private investors in raising trade flows. STEP 5 There should be some level of convergence and greater discipline against inflation. Also, the political and business environment should have a positive effect on trade else the need for intense policy formulation and stringent implementation.

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5.0 Conclusion With the implementation of these suggested institutions, developing countries notably Africa will be well-positioned to take off the currency union. The policy on a common currency is deemed to fail if this institutional framework is not well noted due to the deliberate effort to induce the gains from currency union membership. In this background, a currency union with a common policy should be the benchmark for curing the ills. References Abban, S., 2020. On the Computation and Essence of the Nominal Convergence Criteria for Africa Currency Union: ECOWAS in Perspective.

Amato, M. and Nubukpo, K., 2020. A new currency for West African states: The theoretical and political conditions of its feasibility. PSL Quarterly Review, 73(292), p.3. Abban, S., 2020. On the Computation and Essence of the Nominal Convergence Criteria for Africa Currency Union: ECOWAS in Perspective. Abban, S. and Ofori-Abebrese, G., 2019. The Prospect Of ECOWAS Currency Union On Intra-Regional Trade. Abban, S., 2020. The impact of institutions and infrastructure on intra-regional trade: The Economic Community of West African States. Asongu, S., Nwachukwu, J. and Tchamyou, V., 2017. A literature survey on proposed African monetary unions. Journal of Economic Surveys, 31(3), pp.878-902. Abban, S., 2020. The Prospect of the Proposed Currency Union on Intra-regional Trade: Southern African Customs Union. Abban, S., 2020. Institutions, Infrastructure and East African Community Membership of Burundi and Rwanda on Trade. Abban, S., 2020. The impact of institutions and infrastructure on intra-regional trade: The Economic Community of West African States. Aristotelous, K. and Fountas, S., 2009. What is the impact of currency unions on FDI flows? Evidence from Eurozone countries. Department of Economics University of Macedonia Discussion Paper Series, 10. Broll, U., 1995. Foreign production and optimal hedging of risky revenues. International Economic Journal, 9(1), pp.13-18. | Page 70 of 112

Bloch-Lainé, F., 1956. La zone franc. Presses universitaires de France. Bakoup, F. and Ndoye, D., 2016. Why and when to introduce a single currency in ECOWAS. Africa Economic Brief, 7(1), pp.1-16. Bah, E., 2017. An examination into the quality of regional trade institutions: The economic community of West African states (ECOWAS); a historical, theoretical and modelling perspective (Doctoral dissertation, University of Bradford). Carcel, H., Gil-Alana, L.A. and Madigu, G., 2015. Inflation convergence in the East African Community: a fractional integration and cointegration study. Global Economy Journal, 15(4), pp.507-524. Crowley, P.M., Garcia, E. and Quah, C.H., 2013. Is Europe growing together or growing apart?. Bank of Finland Research Discussion Paper, (33). Cham, T., 2016. Does monetary integration lead to an increase in FDI flows? An empirical investigation from the West African Monetary Zone (WAMZ). Borsa Istanbul Review, 16(1), pp.9-20. Chlond, B., 2018. Costs and benefits of using the Rand as common currency in southern Africa. Calvo, G.A. and Reinhart, C.M., 2000. Fear of Floating," NBER Working Paper No. 7993. De Grauwe, P. and Mongelli, F.P., 2005. Endogeneities of optimum currency areas: What brings countries sharing a single currency closer together?. De Grauwe, P., 2006. What have we learnt about monetary integration since the Maastricht Treaty?. JCMS: Journal of Common Market Studies, 44(4), pp.711730. De Grauwe, P., 1992. German monetary unification. European Economic Review, 36(23), pp.445-453. Frankel, J.A. and Rose, A.K., 1997. Is EMU more justifiable ex post than ex ante?. European Economic Review, 41(3-5), pp.753-760. Fürrutter, M., 2012. „The Eurozone: An Optimal Currency Area?‟. IFIER papers, 2, p.2012. Gulde, M.A.M. and Tsangarides, M.C.G., 2008. The CFA franc zone: common currency, uncommon challenges. International Monetary Fund.

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Gitimu, M.N., 2018. Can East Africa Adopt One Currency? A Generalized-Purchasing Power Parity Analysis (Doctoral dissertation, University of Ghana). Horvath, R. and Komárek, L., 2002. Optimum currency area theory: An approach for thinking about monetary integration. Habimana, O., Sesay, V. and Umulisa, Y., 2020. Business cycle synchronicity within ECOWAS: The Eco-core and the Eco-periphery. Available at SSRN 3708812. Harvey, S.K. and Cushing, M.J., 2015. Is West African Monetary Zone (WAMZ) a common currency area?. Review of Development Finance, 5(1), pp.53-63. Karlinger, L., 2002. The impact of common currencies on financial markets: a literature review and evidence from the euro area (No. 2002-35). Bank of Canada. Kamara, M.S.H., 2015. An analysis of the proposed currency union of the Economic Community of West African States (ECOWAS) (Doctoral dissertation, University of Leeds). Kenen, P., 1969. The theory of optimum currency areas: an eclectic view. Monetary problems of the international economy, 45(3), pp.41-60. Komárek, L., 2002. Optimum Currency Area Theory: A Framework for Discussion about Monetary Integration. Micco, A., Stein, E. and Ordoñez, G., 2003. The currency union effect on trade: early evidence from EMU. Economic policy, 18(37), pp.315-356. Martinez, J., Philippon, T. and Sihvonen, M., 2019. Does a currency union need a capital market union? Risk sharing via banks and markets (No. w26026). National Bureau of Economic Research. Mati, S., Civcir, I. and Ozdeser, H., 2019. Ecowas common currency. Investigación económica, 78(308), pp.89-119. Muthui, J.N., Okara, G.A., Makambi, S.A. and Musyoka, P.K., 2016. A G-Ppp Analysis to the Eac Monetary Integration Process. International Journal of Business and Social Science, 7(1), pp.86-98. Mundell, R.A., 1961. A theory of optimum currency areas. The American economic review, 51(4), pp.657-665. McKinnon, R.I., 1963. Optimum currency areas. The American economic review, 53(4), pp.717-725.

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Mundell, R.A., 1973. Uncommon arguments for common currencies. The economics of common currencies, pp.114-132. Mensah, I., 2015. Monetary and economic union in West Africa: An analysis on trade. International Journal of Business and Economic Sciences Applied Research (IJBESAR), 8(2), pp.87-118. Neurrisse, A., 1987. Le Franc CF A (Doctoral dissertation, Paris 2). Nyamrunda, G.C., 2013. Optimum Currency Areas in the Sub Sahara Region. Nzimande, N.P. and Ngalawa, H., 2017. The endogeneity of business cycle synchronisation in SADC: A GMM approach. Cogent Economics & Finance, 5(1), p.1358914. Ndiaye, G. and Xu, H., 2016. Impact of foreign direct investment (FDI) on economic growth in WAEMU from 1990 to 2012. International Journal of Financial Research, 7(4), pp.33-43. Okom, M.P., Otu, M.T. and Lloyd, C., 2017. Free Movement of Goods and Trade Liberalization in the Economic Community of West African States (Ecowas): A Critical Evaluation. International Journal of Innovative Research and Development, 6. Proczek, M., 2018. The Eastern Caribbean Currency Union Versus the Optimal Monetary Area. on European Integration 2018, p.1216. Rose, A.K., 2000. One money, one market: the effect of common currencies on trade. Economic policy, 15(30), pp.08-45. Redda, E.H., Muzindutsi, P.F. and Grobler, W., 2017. Analysis of feasibility of monetary union in the SADC and EAC: evidence from analysis of trade openness. Rogoff, K., 2005. The euro at five: Short-run pain, long-run gain?. Journal of Policy Modeling, 27(4), pp.441-443. Rose, A.K., 2008. Is EMU becoming an optimum currency area? The evidence on trade and business cycle synchronization. Sireh-Jallow, A., 2013. The empirics of an optimal currency area in West Africa. Int J Econ Fin, 5(4), pp.100-108. Tavlas, G.S., 1993. The ‘new’theory of optimum currency areas. World Economy, 16(6), pp.663-685. Umulisa, Y., 2020. Trade integration and business cycle synchronization among the East African Community countries. | Page 73 of 112

Vrňáková, I. and Bartušková, H., 2013. Is Euro Area an Optimal Currency Area and What Barriers Could Obstruct Its Future Development?. Economic Studies & Analyses/Acta VSFS, 7(2). Yansané, A.Y., 1984. Decolonization in West African states, with French colonial legacy: comparison and contrast: development in Guinea, the Ivory Coast, and Senegal, 1945-1980. Schenkman Publishing Company. Zhao, X. and Kim, Y., 2009. Is the CFA Franc zone an optimum currency area?. World Development, 37(12), pp.1877-1886. Zhao, X. and Kim, Y., 2014. Is the eastern caribbean currency union an optimum currency area?. The Journal of Developing Areas, pp.291-313. Zerihun, M.F. and Breitenbach, M.C., 2018. Is SADC an optimal currency area? Evidence from the generalized purchasing power parity test. Economic Change and Restructuring, 51(2), pp.173-188 Conflict of Interests The author declares no conflict of interests. The author, Stanley Abban, is a B.Sc. Candidate in International Business at the Kwame Nkrumah University of Science and Technology in Kumasi, Ghana.

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Human Resources Management in Sub-Saharan African Banking Industry A Conceptual and Contextual Analysis of HRM Strategies and Macro Factors in Africa’s largest bank By Olusoji Akinola1 1Alba Graduate Business School, The American College of Greece Abstract Abundant information in the literature suggests that the constant and effective implementation of formulated human resource management (HRM) policies and strategies affects how employees’ appreciate the alignment of their personal goals and fit with the organization, and the extent to which the organization regard or respects the agreed terms of employment whether expressly stated or implied. (Mayer et al., 1995; Ross and La Croix, 1996; Dietz and Den Hartog, 2006; Searle et al., 2011b; Whitener, 2001). This objective of this paper is to appraise the training/ development strategies, recruitment strategies, performance appraisal and rewards strategies of Access Bank Plc. The game plan is to access the impact of these strategies on productivity (among other objectives), and to see if there are alternative approach to any of these. The role ofinternal and external factors (globalization, political-economic and organizational structure dimension) on the above mentioned strategies will also be appraised. Conclusions and recommendations on alternative approaches, solutions or strategies to follow (if any) will be thoroughly discussed and a clearer image of the “cause-and-effect” relationship of these strategies (approaches) and increased productivity will be drawn.

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Introduction Access Bank plc is the largest bank in Nigeria and Africa by market share. The bank commenced business in 1990 and has been a major player in the oil and gas, energy, fast moving consumer goods and multinationals sectors, in financial and educational institutions and in real estates. With its corporate head office in Lagos, the bank has nine subsidiaries including the United Kingdom, DR Congo, Gambia, Ghana, Rwanda, Sierra Leone, Zambia, and Burundi.

Access Bank, over the years, has grown from a position of 65 out of 89 banks in the country–to the largest bank in Nigeria. The take-over of the bank by a new management in 2002 was highly instrumental to the achievementof this feat. The management executed several strategies including both organicand inorganic growth strategies, employee training development, enhanced employee selection and recruitment, active employee participation and a reward system that only rewarded high performing individuals or teams. In addition, a culture of excellence was inculcated in the minds of the employee, through ensuring that employees buy-in to the mission, vision, and strategic objectives of the bank. In the execution of its growth strategy, the bank adopted a low centralization structure with an element of organic structure, where the corporate head office is responsible for policy formulation and management of strategic decision and the branches are expectedto implement the decisions from the corporate head office. Branches are allowed the latitude to take decisions on their daily operations, as long as it is within the comfort of the established policies or operating procedures in the bank. Also, branches are empowered to approve credits within their limits as captured in the banks credit policy guide. Credit approvals outside the branch’s limit are sent to the applicable officers for approval in line with the banks credit policy guide. Literature Review A review of the literature point to many well-thought-out publications and reviews on recruitment (Breaugh and Starke, 2000; Taylor and Collins, 2000; Highhouse and Hoffman, 2001; Rynes and Cable, 2003; Chapman and Webster, 2003; Chapman et al.,

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2005; Saks, 2005). Recent research also suggests that today’s organizations still struggle with staffing challenges due to increased knowledge work, labor shortages, competition on the part of applicants, and workforce diversity (Ployhart, 2006). Staffing is understood as a process of selecting and training individuals for specific job functions and charging them with associated responsibilities. Itinvolves attracting, acquiring (initial intake of applicants into the organization), deploying (placement of new hires on the actual job they will hold) and retaining (managing the inevitable flow of employees out of an organization) a workforce of sufficient quantity andquality to create positive impacts on the organization’ss effectiveness. Staffing quality (matching a person‟s qualifications relative to the requirements of the job or organization), quantity (having enough head count to conduct business), person/job match and person/organization match are very strategic in the war for talent and sustained competitive advantage. It is important to recognize that it is the combination of sufficient quantity and quality of labor that creates an effective staffing system. If staff requirements match availabilities, it means the organization is fully staffed (just in time tight staffing strategy). If requirements exceed availabilities, the organization is understaffed; and if availabilities exceed requirements, the organization will be overstaffed (just in case full staffing or intentional over-staffing strategy). While most organizations seek to be reasonably fully staffed, some might choose to be over or understaffed. Overstaffing may occur when there are decline in demand for the organization’s products or services. Organizations may also overstaff to keep talent, recognizing that the staffing engine cannot be easily turned on or off. Understaffing may occur when the organization is confronted with chronic labor shortages, such as is the case for nurses in health care facilities, surgeons, and other professional services. Also, prediction of an economic downturn may lead the organization to understaff to avoid future layoffs. Finally, the organization may decide to understaff and adjust staffing level demand spikes by increasing employee overtime or using flexible staffing arrangement such as temporary employees. The software development organization might choose to overstaff in order to retain key employees and to be poised to meet the hopeful surges in demand as its new products are released. Being understaffed means high pressure on | Page 77 of 112

employees, and the organization will have to gear up its staffing efforts, starting with accelerated recruitment and carrying on through the rest of the staffing system. It may also require development of retention programs that will slow the outflow of people, as well as the use of self- managed teams with a high degree of co-operation and knowledge of one another‟s work. Overstaffing projections signal the need to slow down or even halt recruitment, as well as to take steps that will actually reduce head count, such as through reduced workweeks, early retirement plans, or layoffs. This is necessary because overstaffing lowers productivity, increases costs, makes the company‟s products less competitive in the market due to increased prices of goods, and cripples the organization as well as others subsidizing it.

Adapted from Trust and Human Resource Management, 2011: The HRM cycle Access Bank and the 3R’s (Recruitment, Retention and Reward) Recruitment Philosophy and Practice at Access Bank Plc

The philosophy is to do whatever it takes to make sure every single core staff hire is an “A” talent that fits culturally and share the vision, mission and values of the organization. Access Bank has a rigorous which accesses candidates for qualities like general cognitive ability through standardized tests, learning abilities, initiative, flexibility, teamwork, personal and behavioral attitudes, leadership, role-related knowledge, problem-solving skills, evidence of sound knowledge of the financial environment and components of what makes a candidate to be an ideal “Access Person” (qualities that would enable them to thrive in such an environment).

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Access Bank dedicates huge financial resources to its recruitment process which starts with identification of manning gap, analysis and gathering requirements for each job opening, defining criteria for assessing recruits, incentives or rewards, identify potential sources or recruitment channels, select the right person, induct the new starter, measure, review and evaluate. Every decision point requires a painstaking process that involves a panel of people who assess the candidates at each milestone. The final hiringdecision is made by the CEO. This rigorous process weeds out anyone who is merely anaverage or a low skilled candidate. Premium is placed on passion for customers, leadership and innovative instincts. Access Bank is interested in highly motivated hires who can take ownership and hit the. The hiring process involves a first conversation with a recruiter, a phone interview and an onsite interview at its head-office or selected regional office. First, a small group of staffers interviews the candidates. Then a second committee of senior managers reviews all materials about the applicants, including those they submitted on their own behalf as well as interviewer feedback. Then the Head of HR, interviews the candidate toassess cultural fit and consistency with the Access Bank brand values. Access bank conducts series of behavioral/family background interviews (at least three) before settling on a job candidate and making an offer. On average, the bank takes about 35 days to hire which last 5 stages ending with the CEO as the final approver. Some of the standard recruiting tools Access Bank uses include employee referral, college recruitment (including outstanding internship program that has a very high conversion rate to permanent hires), Head hunters, professional networking (networking groups like Linkedin, facebook and job boards. At Access, recruiting is responsible for filling both executive leadership, middle-level and lower level positions. To ensure that the company has the capability to recruit talent at the capacity needed, the recruiting model has been broken up into very distinct roles, each requiring specialized expertise. These activities, carried out in a highly choreographed manner by teams tied to Human resources group and the recruiting business unit include: recruiting research specialists; candidate sourcers; Recruiting generalists; screening committee; specialized recruiters for colleges/

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internships and recruiting program managers. Such specialization enables the function to be managed in a way like a supply chain. Downsides in the Access Bank approach Access Bank‟s primary strength in recruiting comes from the fact that they “attract the brightest and the best” and that they have also succeeded in retaining the brightest and the best within the workforce. However, some of the downsides affecting recruitment in Access Bank which I will like to urgently address are outlined below: Hiring philosophy and process: Access Bank is known in the industry for hiring talent that they don’t have a need for at the moment, hiring for “talent’s sake not for role-sake.” The competition for talents is a zero-sum game in the Nigerian Banking industry as the fear of losing key talents to competition could affect a banks competitive advantage especially in the areas of deposit mobilization, product development and technology. This is synonymous with just in case full staffing approach which has the tendency of lowering productivity and increasing costs, leading to reduced competition inthe industry. Recommendations A deliberate understaffing strategy with the use of self-managed teams will be more beneficial for Access Bank as that will make the bank to maximize the returns on investments made in recruiting only “A grade” employees and promote teamwork and continuity even if the team loses a staff. Just in time tight staffing is may not be desirable because it will make the bank less capable of responding to the sudden loss or absence of key talent (s). Also, deliberate overstaffing has similar but worse demerits as just in case full staffing strategy discussed previously. However, while there could be some cost saving in recruiting grade-B (average) people, it would push the bank into mediocrity in the long run. Also, I recommend a more flexible and less mechanical and less bureaucratic hiring process by relying more on behavioral and scenario-based interviews in order not to miss outon very Intelligent and creative talents that may not want to be subjected to the rigors of the current process. | Page 80 of 112

In the filling of the vacancy for support staff or administrative assistants, I recommend thatthe bank go for low skilled employees and /or average performers. The recruitment will be outsourced in other to cut down on the cost of recruitment and adequate training and right exposures needed will be provided. Just like the Finnish Caledonian paper case, selectionfor this group of people will be based on flexibility, trainability, willingness and ability to work as part of a team, orderliness, low dominance and endurance. Career paths will be provided and performers will be rewarded. Globalization, Political – Economy and Organizational Structure onRecruitment/Staffing. Globalization is affected either positively or negatively by the prevailing political economic systems and organizational strategy or structure (Ulrich and Brockbank 2005.pp 31-32). Regulatory or legal requirements, labor laws, culture and social environment also affects recruitment or staffing for a global company. In the case of Access Bank, its presence in 9 different countries has compelled the bank to decentralize its recruitment policies and practices (see appendix 3) and position it in tandem with local realities and local labor laws. For instance, in Central African countrieswhere the bank has three subsidiaries, its focus is solely on recruiting average performers ( grade „B‟) and the bank rely on intensive classroom and on-the-job rotational training in Nigeria to bring its workforce up to speed. This is because of the relative scarcity of grade „A‟ employees in the region. Also the bank occasionally recruit hires from other African countries to fill identified vacancies in the Central Africa. Where key talents are identified for these regions even when there are no vacancy, Access Bank keeps such talents in the pipeline. Appraisals and Reward at Access Bank Performance appraisal is the method in which an employee‟s job performance is evaluated and reviewed. Performance Appraisal is the systematic evaluation of the performance of employees and to understand the abilities of a person for further growth and development (Muchinsky 2012) .This compares employee work behavior with the organizations pre-set standards or metrics to provide feedback on job performance. Performance appraisals are a form of motivation through either positive or negative

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reinforcement, depending on outcome. The goal is to align and manage allorganizational resources to achieve highest possible performance by motivating staff through encouragement, setting targets and improving on past errors or inadequacies, identifying training/developmental needs by asking few questions, getting feedback from employees in the process. The overall aim of performance management is to establish a culture of excellent performance in which individuals and teams take responsibility for the continuous improvement of business processes and activities and for their own skills and contributions within a framework provided by effective leadership (Armstrong, 2006). Performance appraisals can take the form of 360-degree (evaluation by superiors, peers, self and subordinates), 180-degree (evaluation by superiors and peers) and 90- degree (evaluation by superiors only). Armstrong (2006) also argued that most organizations follow SMART mnemonic to summarize the characteristics of good performance appraisal objectives. S SPECIFIC Clear, Understandable and Challenging M MEASURABL Quality, Quantity, Money and Time. E A ACHIEVABL Challenging but in the reach of an experienced and committed E person R RELEVANT Related to the objectives of the organization so that the goal of the employees is associated to corporate goals T TIME Objective is to be completed within a timescale FRAMED

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Performance Review at Access Bank Performance reviews at Access Bank happens twice a year while promotions happen at the end of the year, following the outcome of the 90-degree performance appraisal reviews and most employees need to be in their positions for at least a year to be promoted. The 90-degree performance appraisals though laden with subjective opinions, nothwithstanding final appraisal grading and promotion decision is approved by a bankwide collegiate committee of the bank consisting of all senior managers up to the CEO. The 360-degree is most preferable as it provides a bird eye view of the suitabilityor otherwise of candidates for promotion and it also a reflection of general acceptance rather than a sectional acceptance that the 90 or 180-degree posits. However, a combination approach also looks good, where 360-degree will be used for top management staff, 180-degree for middle level staff and 90-degree for low level staff. This depicts the leadership, responsibilities and professional roles that is expected at each level of management.

At Access Bank, despite the 90-degree method, supervisors will have to justify their appraisee‟s appraisal grade with concrete visible examples at the collegiate appraisal committee meeting before decisions are taken. This is supported by literature which states that given the personal nature of an appraisal about an individual‟s ability and contribution, it has the potential to impact on self-esteem, psyche and performance (Crossman and Lee-Kelley, 2004). Indeed, any impact on performance may well be negative as performance reviews which are perceived as unfair tend to result in lower morale and performance (Cropanzano et al., 2002). To deal with the above-mentioned problem, Access Bank developed a “professional development plan” for positions at each level detailing what was required in various categories (customer focus, error-free processing, liability generation, loan monitoring, innovation and creativity, decision making, delivering results, collaboration and team work, communication and “Access Person”). As HRM systems have been said to represent the „relationship, interaction and message between employee and employer‟ (Tzafrir, 2005:1601), the performance appraisal process is not only one of one of its most visible manifestations, but also a focal point for the articulation of the relationship | Page 83 of 112

(Deutsch-Salamon and Robinson, 2008). Risk and vulnerability, two quintessential features of trust, often come to the fore through this process. It is an area where many organizations report dissatisfaction (Cook and Crossman, 2004). HRM system characterized by high performance work practices were found to have a significant and direct effect on employee commitment (Taylor et al., 2008; Whitener, 2001). Reward management is concerned with the formulation and implementation of strategies and policies that aim to reward people fairly, equitably and consistently in accordance with their value to the organization. Reward management consists of analyzing and controlling employee remuneration, compensation and all of the other benefits for the employees. Reward management aims to create and efficiently operate a reward structure for an organization. Reward structure usually consists of pay policy and practices, salary and payroll administration, total reward, minimum wage, executive pay and team reward (Armstrong and Murlis, 2004).Reward management deals with processes, policies and strategies which are required to guarantee that the contributionof employees to the business is recognized by all means. Objective of reward management is to reward employees fairly, equitably and consistently in correlation to the value of these individuals to the organization. Reward system exists in order to motivate employees to work towards achieving strategic goals which are set by entities. Reward management is not only concerned with pay and employee benefits. It is equally concerned with non-financial rewards such as recognition, training, development and increased job responsibility. To have an efficient Reward System, it is mandatory that employees know exactly what their task is, have the skills to do it, have the necessary motivation and work in an environment allowing the transformation of intended actions into an actual behavior. From the company point of view instead, an effective performance appraisal has to be present, in order to let motivation be a major contributor to the rewarded performance (Mitchell, 1982).

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Rewards serve many purposes in organizations. They serve to build a better employment deal, hold on to good employees and to reduce employee turnover (Watson, 2003).The goal is to increase people's willingness to work, to enhance their productivity (Gkorezis and Panagiotis, 2008). Rewards can be both extrinsic (concrete rewards that employee receive) and intrinsic (tend to give personal satisfaction to individual). Extrinsic rewards include bonuses, salary raise, gifts, promotion and other kinds of tangible rewards. Intrinsic rewards include information/feedback, recognitionand trust/empowerment. Intrinsic rewards makes the employee feel better in the organization, while extrinsic rewards focus on the performance and activities of e m p l o y e e s in order to attain a certain outcome. The principal difficulty is to find a balance between employees' performance (extrinsic) and happiness (intrinsic) (Reif, 1975). The reward also needs to be according to the employee‟s personality. When rewarding, the manager decides if he wants to reward an Individual, a Team or a whole Organization. One will choose the reward scope in harmony with the work that has been achieved. I. a. b. II. III.

Individual Base pay, incentives, benefits Rewards attendance, performance, competence Team: team bonus, rewards group cooperation Organization: profit-sharing, shares, gain-sharing

Rewards at Access Bank Plc Access Bank fast growth has been traceable to its effective and attractive motivational policy using a combination of intrinsic and extrinsic rewards. Seeking to be the employer of choice in Africa, Access Banks success is partly attributed to its highly motivated workforce who are poised to go beyond the ordinary, to deliver the perceivedimpossible. Motivation can be defined as the processes that account for an individual‟s intensity, direction and persistence of effort toward attaining a goal. Access Bank encourages individual performance and reward over group performance, while task might be for a group, however reward will be based on individual | Page 85 of 112

contribution to the group rather than the overall group outcome. I prefer group reward for group task over individual contribution to the group as this will promote cohesion, teamwork, learning and development, reduce strife and ultimately increase productivity. On the other hand, individual reward gives the employee the incentive to move at its own pace and determine his or her reward and thereby take responsibility and ownership for every task or actions, thereby sustaining increased productivity. In terms of salary and incentive payment, Access bank focuses more on incentive payments. Incentive payments is about 10 times more than the salary, so not earning such huge bonus is a huge loss. Incentive payments help employees to move at a fasterpace to achieve their set targets, it also has the limitation of making employees to have ashort term focus, hence defeating long term gain that would have accrued to the organization. Salary payment on the other hand stifles motivation and can adversely affect productivity. Explaining Motivational practices at Access Bank using McClelland's Learned Needs Theory of Motivation. The assumption of McClelland's theory of needs is that people with different needs are motivated differently. The implication for managers is finding what motivates certain individual groups and assigning them with different rewards. Those with high needs for achievement should be given challenging projects with reachable goals. They should be provided with frequent feedback. Those who seek a need for affiliation should be placed in groups that can work as a team. Those who have a need for power should be givenan opportunity to manage others. McClelland's theory allows for placing individuals to match a person‟s emotional needs to certain job design. The main theme of McClelland's theory is that these needs are learned through coping with one‟s environment. Managers can learn to see an employee‟s strength by placing individuals in certain training programs where they will be motivated to find their niche in certain skills needed in the organization. Since needs are learned, behavior which is rewarded tends to recur at a higher frequency.

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McClelland's proposed a theory of motivation that is closely associated with learning concepts and believes that many needs are acquired from culture. There are three main points to McClelland's theory: the need for achievement, the need for affiliation, and the need for power. 1. Need for Achievement - Having a need for achievement encourages an individual to set challenging goals, to work hard to achieve the goals, and to use the skills and abilities needed to achieve them. A descriptive set of factors that reflect a high need for achievement include the fact that the person - likes to take responsibility for solving problems. - tends to set moderate achievement goals and is inclined to take calculated risks. - desires feedback on performance. Access Bank was able to stir and enhance this need in its recruit right from the recruitment process by ensuring that only an “A” player who fits with the core values of the organization is employed. Employees who can go beyond the ordinary to produce outstanding success are rewarded. The introduction of Access bank stock option for outstanding performers, quality training for high performing staff at top business schools such as Harvard, Wharton, INSEAD and the Access bank CEO awards which rewards outstanding and innovative performance 2. Need for Affiliation (desire to seek approval, conform and avoid conflict by trying to project a favorable self-image) - The need for affiliation reflects a desire to interact socially with people. A person with a high need for affiliation is concerned about the quality of important personal relationships, and thus, social relationships takeprecedence over task accomplishment. What others perceive one to be like is a huge factor in one‟s needs. Image is everything. Access Bank actively enhanced this drive through free use of swimming pools and work-out facilities at its head office, corporate membership of various social clubs, gyms and concerts office. Other company initiatives to encourage community building and cross fertilization include company-sponsored field trips, team bonding sessions, a day with top management, family picnics and Friday night social gathering. | Page 87 of 112

3. Need for power [desire to control one‟s environment; personalized (to advance selfinterest) versus socialized power (as a means to help others)] - A person with a high need for power concentrates on obtaining and exercising power and authority. He or sheis concerned with influencing others and winning arguments. Power has two possible orientations according to McClelland. It can be negative in that the person exercising it emphasizes dominance and submission. Power can also be positive in that it reflects persuasive and inspirational behavior. Significant aspects of the culture of Access Bank is designed so as to create a culture on information sharing and collaboration. The fascinating aspect of Access Bank is its intrinsic rewards and how it allows employees to operate with freedom and respect, allowing them control of their own projects and programmes empowering them to take full ownership and responsibility. Globalization, Political Economy and Organizational Structure on Performance Appraisal and Rewards Access banks motivational and rewards system also takes care of all the five needs that are listed in Abraham Maslow‟s hierarchy of needs. Through competitive pay, free transportation, subsidized food and monetary rewards, Access bank takes care of the physical, security and social needs. Through measures like granting loans to employeesto finance their dream car, dream home and dream vacation, the bank strive to fulfil its employees higher level self-actualization and self-esteem needs.

In terms of performance appraisal and rewards at Access bank, there are elements of social democratic capitalism where performance appraisal and reward is solely tied to productivity especially at the head office and regional headquarters. Regrettably in some of the African subsidiaries and local branches there exists elements of crony capitalism where performance appraisal and reward is determined by who is closer to the big boss or who does the domestic errands by the big boss. Again, in most branches managers have full autonomy on performance appraisal and compensation and they are more amenable to bending the rules often. | Page 88 of 112

Training and Development The financial and cost impact of lack of development plan and training for employees have been well documented in the literature (Ulrich and Brockbank 2005; Lipman 2013). Quite important, but training and development is often the most neglected aspect of management or better still handled as a bureaucratic exercise or an afterthought and this makes companies to pay huge price for such avoidable slips. Sometimes lack of training could be a deliberate cost cutting approach or could be attributable to a sunk cost in cases where an employee leaves the organization after the training. Access Bank Training and Development strategy Just like the BMW South Carolina case, Access Bank prefers to develop and train average people at very high level for its support functions and recruit and train A‟ grade people for its core activities. In cases where it is absolutely necessary, Access bank hires elite employee for its core business especially where the competencies are not readily available in-house. Therefore Access bank practice a blend of the two approaches depending on need and situation. In terms of conformity vs creativity and innovation, Access Bank employs a blend of the two depending on job function. Being a bank, some job require that staff follow strictly standard operating procedures, however Access Bank encourages its staff to be innovative especially where it is expected to enhance processes and increase productivity. However in roles such as product development, service delivery creativity isgreatly encouraged as it forms an integral part of the KPI‟s of employees in such roles. Innovation to processes, procedures and activities that would reduce error rate, increase turnaround time, reduce lead times and reduce wastages. Recently the bank launched a process improvement program which was code-named operation eliminate stupidrulesThese are policies and procedures that delay the delivery of exclellent service andwith little or no bearing on the banks bottom-line. The game plan is to review all existing policies and processes, eliminate the outdated ones and trim down the current processes that are impeding service deli very with little or no positive impact on the banks bottomline. | Page 89 of 112

Access Bank has a performance improvement plan for improving poor performance. Following the conclusion of the annual appraisal exercise every staff with a „C‟ grade is assigned to a mentor who will mentor them for a minimum of 6 months and review performance. If there is no improvement such staff is advised to resign, after which a replacement is sought externally via the recruitment system. Access Bank has developed its own training program for its staff at different level. Top performers are sent to leading business schools such as Harvard and INSEAD for modular training, medium and average performers are trained in-house. The top performers‟ form a pool of elite employees profiled and are generally referred bankwide to as Key talents. As part of training and development, the bank also encourage job rotations, projects, programs, group task, work teams, work streams and quality circles. Recommendations and Conclusions From the foregoing i would argue for developing average people than hiring elite employee because: • Elite employees have an appreciation of self-worth, hence they are always mobile, hence recruitment will always be on-going and productivity will be low. • This will increase both recruitment and training cost hence affecting bottom-line • Average people tend to appreciate the volume investment into their development; hence they might be more loyal than elite employees and stay in the organization. • With proper training and mentoring average people will most likely perform as better as the elite employees with less pay. However, for specialized task that require high level initiative and creativity, it is better to opt for the elite employee, however monotonous or repetitive task are better performed by average people. Also, creativity and innovation rather than conformity are better applied in jobs that require innovation, IQ and initiative such as in high tech like Microsoft, Google, 3M e.t.c. Poor performers are better replaced when there are no obvious signs of improvement or willingness to improve or when they are irredeemably poorly motivated or if there is a | Page 90 of 112

misalignment with organizational goals. In this case there is no need for further improvement plan as it is better to let go than to regret. In situation where industry / national training program are available and will lead to significant cost reduction without compromising quality, then it is ideal to opt for industry training program. For instance in the banking industry where all banks share the same credit or card schemes (VISA, MASTERCARD), the same switches, the same processors, industry training program is most ideal as there is no need for a single bank to invest in all these trainings. Since the platform is a shared service platforms across banks, training also has to be provided as a shared service. References Armstrong, M. and Murlis, H. (2004). Reward management: a handbook of remunerationstrategy

and practice (5th ed.). London [u.a.]: Kogan Page Publishers. Armstrong, M. (2006). Performance Management: Key Strategies and Practical Guidelines. 3rd Ed. London: Chartered Institute of Personal and Development. Breaugh, J. and Starke, M. (2000). Research on employee recruiting: So many studies, so many remaining questions. Journal of Management, 26: 405-434. Chapman, D. S., and Webster, J. (2003).The Use of Technologies in the Recruiting, Screening, and Selection Processes for Job Candidates.International Journal of Selection and Assessment, Volume 11, Issue 2-3, pp. 113–120. Chapman, D. S., Uggerslev, K. L., Carroll, S. A., Piasentin, K. A., and Jones, D. A. (2005). Applicant Attraction to Organizations and Job Choice: A Meta-Analytic Review of theCorrelates of Recruiting Outcomes. Journal of Applied Psychology, 90(5), 928. Cook, J. and Crossman, A. (2004). Satisfaction with performance appraisal systems: a study of role perceptions. Journal of Managerial Psychology, 19 (5), 526-41. Cropanzano, R., Prehar, C.A. and Chen, P.Y. (2002). Using social exchange theory to distinguish procedural from interactional justice. Group Organization Management, 27 (3), 324-51.

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Crossman, A. and Lee-Kelley, L. (2004). Trust, commitment and team working: the paradox of virtual organizations‟ global networks. A Journal of Transnational Affairs,4(4), 375-90. Deutsch-Salamon S. and Robinson, S. L. (2008). Trust that binds: The impact of Collective Trust on Organizational Performance. Journal of Applied Psychology, 93 (3), 593-601. Dietz, G. and Den Hartog, D. N. (2006). Measuring trust inside organizations. Personnel Review, 35(5): 557-588. Douglas McGregor (1960). The Human Side of Enterprise. McGraw Hill Professional (Annotated Edition, 2005): pp 1-256. Fielder, F. E. (1964). A theory of leadership effectiveness. In L. Berkowitz (Ed.), Advances in experimental social psychology. New York: Academic Press. Fielder, F. E.(1986).The contribution of cognitive resources to leadership performance. Journal of Applied Social Psychology, vol. 16, pp. 532–545. Geoff, T., Robin M., Olga E., Yves G. and Allan L. (2013). Social cognition in leader– follower relationships: Applying insights from relationship science to understanding relationship-based approaches to leadership. Journal of Organizational Behavior, 34 (S1): S63–S81. Gkorezis, P. and Panagiotis, E. (2008). Employees' Psychological Empowerment via Intrinsic and Extrinsic Rewards. Academy of Health Care Management Journal (The DreamCatchers Group, LLC) 4 (1): 17–38. Henry, A (2012), “Effects of monetary policy on banks asset portfolio behaviour; evidence from Nigerian economy (1980 - 2009)”, International Journal of Academic Research, 4, 5, pp. 103-117, Academic Search Premier,EBSCOhost, viewed 19 October 2014 Hermans, H.J.M., Kempen H.J.G and van Loon E.J.P. (1992). The Dialogical Self: Beyond Individualism and Rationalism. American Psychologist, 47, p. 23-33. Hermans, H.J.M. and Kempen H.J.G (1993). The dialogical self. Meaning as movement. NY: Academic Press.

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Hersey, P. and Blanchard, K. H. (1969). An introduction to situational leadership. Training and Development Journal, vol. 23, pp. 26–34. Highhouse, S. and Hoffman, J. R. (2001). Organizational attraction and job choice. In C. L. Cooper and I. T. Robertson (Eds.), International review of industrial and organizational psychology, Vol. 16: 37-64. Manchester, UK: Wiley. House, R. J. (1996). Path–goal theory of leadership: Lessons, legacy, and a reformulated theory. Leadership Quarterly, vol. 7, pp. 323–352. Isaacs, W.N. (1999). Dialogic Leadership. Systems Thinker, 10, 1, 1-5. Jensen, M. C. and Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3, p.308. Lewis, J. D. and Weigert, A. (1985). Trust as a social reality. Social Forces, 63, 967– 985. Mayer, R. C., Davis, J. H. and Schoorman, F. D. (1995). An integrative model of organizational trust. Academy of Management Review, 20, 709–734. Mitchell, T.R. (1982). Motivation: new directions for theory, research, and practice. The Academy of Management Review. [E-journal]. 7(1), 80-88. Available at: Accessed: 5th May 2014. Mondy, R.W., Shaplin, A. and Premeaux, S.R. (1991). Management Concept, Practices and Skills. Boston: Allyn and Bacon. Muchinsky, P. M. (2012). Psychology Applied to Work. Summerfield, NC: Hypergraphic Press Nielsen, R. P. (1990). Dialogic leadership as ethics action (praxis) method. Journal of Business Ethics, October 1990, Volume 9, Issue 10, pp. 765-783. Lipman, V. (2013). Why Employee Development is Important, Neglected and Cost you Talent. Accessed 15th April 2020 Ployhart, R. E. (2006). Staffing in the 21st Century: New Challengesand Strategic Opportunities. Journal of Management, Vol. 32 (6), pp. 868-897. Reif, W. E. (1975). "Intrinsic versus Extrinsic rewards: resolving the controversy". HumanResource Management (Wiley Periodicals Inc.) 14 (2): 2–9. | Page 93 of 112

Ross, W. and LaCroix, J. (1996). Multiple meanings of trust in negotiation theory and research: A literature review and integrative model. International Journal of Conflict Management, 7, 314-360. Rynes, S. L. and Cable, D. (2003). Recruitment research in the twenty-first century. In: W. C. Borman, D. R. Ilgen, andR. J. Klimoski (Eds.), Handbook of psychology: Volume12: Industrial and organizational psychology: 55-76. Hoboken, NJ: Wiley. Saks, A. M. (2005). The impracticality of recruitment research. In A. Evers, O. SmitVoskuyl, & N. Anderson (Eds.), Handbook of personnel selection: 47-72. Oxford, UK: Basil Blackwell. Searle, R.H., Weibel, A. and Den Hartog, D. N. (2011b). Employee trust in organizationalcontexts. In: Hodgkinson, G. P. and Ford, J.K. (eds). International review of industrial and organizational psychology. Chichester: Wiley-Blackwell. pp.143-91. Syvänen, S., Tappura, S., Loppela, K., Kasvio, A., Lundell, S. and Tikkamäki, K. (2012). Dialogic leadership promoting sustainable working life and innovativeness. Available online at (Accessed May 3, 2014, 13:15). Taylor, M. S. and Collins, C. J. (2000). Organizational recruitment: Enhancing the intersection of theory and practice. In: C. L. Cooper & E. A. Locke (Eds.), Industrial and organizational psychology: Linking theory and practice:304-334. Oxford, UK: Basil Blackwell. Taylor, S., Levy, O., Boyacigiller, N.A. and Beechler, S. (2008). Employee commitmentin MNCs: Impacts of organizational culture, HRM and top management orientations. TheInternational Journal of Human Resource Management, 19: 501–27. Tzafrir, S.S. (2005). The relationship between trust, HRM practices and firm performance. International Journal of Human Resource Management, 16: 1600–22. Ulrich, D. and Brockbank, W. (2005). The HR Value proposition. Harvard Business Press. Pp 31-35

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Watson, Stephen (2003). "Building a Better Employment Deal". Workspan 46 (12): 48– 51. Whitener, E.M. (2001). Do “high commitment” human resource practices affect employee commitment? A cross-level analysis using hierarchical linear modeling. Journal of Management, 27: 515–35. Yankelovich, D. (2001). The Magic of Dialogue: Transforming Conflict into Cooperation.Touchstone. Conflict of Interests The author is a student at Alba Graduate Business School, The American College of Greece and has completed an internship at the Access Bank Plc prior to the submission of this manuscript.

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Artificial Decision-Making A Theoretical Model for Artificial Learning, Memory Management and Decision-Making System By Ravin Kumar1 1Meerut Institute of Engineering and Technology, Uttar Pradesh. Abstract Human beings are considered as the most intelligent species on Earth. The ability to think, to create, to innovate, are the key elements which make humans superior over other existing species on Earth. Machines lack all those elements, although machines are faster than human in aspects like computing, equating etc. But humans are still more valuable than machines, due to all those previously discussed elements. Various models have been developed in last few years to create models that can think like human be-ings, but are not completely successful. This paper presents a new theoreti-cal system for learning, memory management and decision making that can be used to develop highly complex systems, and shows the potential to be used for development of systems that can be used to provide the essential features to the machines to act like human beings. Keywords: Artificial Human, Learning algorithm, Artificial Brain, Artificial Memory Management, and Robotics. 1. Introduction The ability to think have made humans more important than other species, this have enabled us for development of science, technology, and our own civilization. Many attempts have been made to artificially create a system that can show all those features that made humans more important than any other species, features like- thinking capability, feelings, emotions etc. Some models have been made using inspiration from nature, some purely from mathematics, and are still in use today. Some of these structures are given below.

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1.1 Artificial Neural Network

Artificial neural networks learn to compute a function using example inputs and outputs. Neural networks have been used for a variety of applications, including pattern recognition, classification [1], and image understanding [2]. Artificial Neural Networks are said to be a universal approximation function. 1.2 Fuzzy Logic

This approach uses the model based on degree of truth rather than just exact true or exact false states. It is the from many-valued logic in which the truth values of variables may be any real number between 0 and 1 [3]. 1.3 Genetic Algorithm

This approach is inspired by the process of natural selection , these are generally used to solve optimization and searching problems by relying on bio-inspired operations such as mutation [4] and cross over [5]. Learning is improvement on performance with experience over time. There are mainly three types of learning mechanism that have been developed artificially by human beings, and these are explained further. 1.4 Supervised Learning

In this type of learning, a tutor is present to guide the machine by providing its feedback. In this approach the data is labeled [6-7]. 1.5 Unsupervised Learning

In this type of learning, no tutor is present and machine learn by trying on its own. In this approach the data is not labeled [8-9]. 1.6 Reinforcement Learning

In this type of learning, the main concern is how software agents ought to take actions in an environment so as to maximize some notion of cumulative reward [10].

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All these above discussed models are used for solving problem using machine learning, and have shown some effective results also, But they all still are unable to make a system which is as much powerful as our human brain. This paper presents a theoretical system which when implemented can be used for designing of a complex machine such as human brain, which will be capable of learning, managing memory and taking decisions effectively. 2. Proposed System In the proposed system, Memory Pixel is the proposed to be the smallest unit in which a individual data can be represented. Memory Pixel consist of four fields, namely Color, Intensity, Device_ID and Data.

Fig. 1 Representation of Memory Pixel.

Memory pixels consist of following fields: - Color: It represents the relatedness of data. Color represents feelings, actions, emotions etc. - Intensity: This field represents the importance of data. Higher value represents more important data. - Device_id: It represents that peripheral device from where either the data have been received, or the command have to be send to perform some action. - Data: It contains the data, which is either obtained from the peripheral device, or are generated during the processing. Memory screen shown in Fig. 2 is the collection of memory pixels collected at the same time ‘t’, and other than that, it also have three fields- Color, Sequence_number and Data. Here Color represents the color field, which is in majority, in the memory pixel of that particular memory screen. Sequence_number represents the sequence number of the screen pixel. Data represents the most commonly occurring data, in the memory pixels of the memory screen.

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Fig. 2 Representation of Memory Screen. The overall architectural design of the proposed system is given in Fig. 3.

Fig. 3 Decision Making System.

Peripheral Device: it acts as the artificial sense organ which provide data to the Decision Making System, and takes the command from the system, to perform the action which is decided by the system, each device have a unique id (i.e. device_id ). It sends data in the form of Memory Pixel, each having the device_id of their respective peripheral device. Current Screen: it holds the current data that is received from all the connected peripheral devices, in the form of Memory Screen, and generates the memory screen, and assign it the sequence number (in ascending order). Screen Pool: it holds all those previously received memory screens, which contain important data (importance is decided by the intensity of the memory screens, along with its color field). It is also represented in Fig. 4.

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Fig. 4 Screen Pool containing ‘N’ memory screens.

Pixel Pool: It is the place where all free memory pixels are placed. When the data is received from the peripheral device then these memory pixel moves to current screen, receives the data, and form a memory screen for the screen pool. And when a memory screen is removed from the screen pool, then the contained memory pixels are moved back to the pixel pool. Color Table: It contains three attributes namely- Color, Memory Screen Number, and Data. The color field represents the color that is available in the memory pool and memory pixel. Memory screen number represents the sequence number of that memory screen which have same color value, and the data field contains the value of the data field of that memory screen. It is represented in Fig. 5.

Fig. 5 Representation of COLOR TABLE.

There is a continuous process which helps in removing the irrelevant data from the Screen Pool, and updates the attribute values of the Color Table. This process decrements the value of Intensity of the memory pixels, that are present in various memory screens, except those in the root memory screens (Root memory screen contains those functions, emotions and their associated data, that can not be over written). In this process, after every ‘w’ second (‘w’ can be assigned any value greater than 0) the intensity of all

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memory pixel is decremented by 1. When the value of the intensity becomes -1, then that particular memory pixel gets removed from the memory screen, and send back to the pixel pool. This process is applied to all the memory screens except the root memory screens. And the memory screens that have their sequence number in the Color Table, their memory pixels intensity is incremented by a ‘r’ (where, 0 < r < 1). When their is no memory pixel present in the memory screen, then that particular memory screen is removed from the screen pool, and all its entries in the Color Table are also removed. 3. Memory management and decision-making system The learning, memory management and decision-making processes of the proposed system is discussed below. Firstly, memory management process is discussed, and then the decision-making process is discussed, learning mechanism continues in both these steps. 3.1 Memory Management Procedure It is a continuous process, which is applied after every ‘p’ seconds. The parameter p can be set any value that is above 0, but for better performance p should be greater than 0 and less than 1.

Step1: Take inputs from various peripheral devices, and store that data into the Data field of the memory pixels (memory pixels are received from the pixel pool ), and assign the peripheral device number to the device_id field of the irrespective memory pixels. Step2: All these memory pixels are then collected in the current screen, to form a new memory screen. Sequence number of each memory screen is assigned in the increasing order. Step3: In the current screen, data field value of each memory pixel is checked with the Data field value of the Color Table, and If the Data values matches then, the corresponding color value is assigned to that memory pixel. And if values do not matches, then new Color value is assigned to the memory pixel and maximum intensity is assigned

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to that memory pixel, and a new entry is made in the color table, having same color value as that of the memory pixel. Step4: If the color value was previously present in the color table then, the intensity of memory pixel is set to ‘I’, (where I < Maximum Intensity). And if the color value is newly assigned to the Color Table then, the intensity of memory pixel is set to maximum. Step5: Now in the current screen, majority of the color is checked, and the color which is used by majority of pixels, is assigned to the Color field of the memory screen (which is created by current screen). Now each field of the memory pixel, and memory screen (created by current screen) have a value. The memory screen is then sent to the screen pool. Step6: The continuous process helps in updating the Color Table, removing their irrelevant information, and free those memory pixels that have data of no importance. It is shown in Fig. 6. Step7: To receive new data from outside, GOTO Step 1.

Fig. 6 Representation of the continuous process. 3.2 Decision Making Procedure It is also a continuous process, which help in process like learning, decision making etc.

Step1: During the memory management process, when all the field values are assigned to the current screen, then the color value and the data field value of the newly created memory screen ( present in the current screen), is matched with the values of the Color Table. | Page 102 of 112

Step2: IF all the value matches, then the system go to that memory screen, whose sequence number was present along with the matching data in the Color Table. And perform the action described in the data field of that particular memory screen. Step3: IF only the color value matches, then all the memory pixels of that particular color, that are present in the memory screen, whose sequence number is present in the Color Table, having the same color value, as that of the newly created memory screen, are copied to the newly created memory screen. Step4: IF Color field do not matches, then the next major color is calculated, and all the searching is performed on the basis of that color. And if color field of that next major color is matched with the color field of Color Table, then search for next major color, and so on, till either a match is found, or all the color have been checked. Step5: IF their is no match found in the step 4, then no action is performed. 4. Results and discussion The proposed theoretical system provides a new approach for learning mechanism, by introducing the memory pixels,relating data with previous knowledge becomes more easy. With the introduction of screen pool the unnecessary memory usage is avoided, this feature is inspired by the concept of “forgetting things” in human beings. Using real time data, it is possible to take on the moment decisions with the help of color tables. More than one screen pools can be used for better performance, and more than one decision making systems can be combined for achieving better results. Depending upon the type of machine we want to design we can add or remove fields in the memory pixel, and the color table. 5. Conclusion The proposed theoretical system can be used for developing new effective machines that can provide much more capabilities and can work with highly complex data. This theoretical system can be used for developing much complex structures such as human brain. With the introduction of this system more research work can be done in field and more effective and efficient systems can be build.

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References Daniel A. Jim and Calvin Lin, “Dynamic Branch Prediction with Perceptrons”, The University of Texas at Austin, TX 78712.

D. A. Jim enez and N. Walsh. Dynamically weighted ensemble neural networks for classification. In Proceedings of the1998 International Joint Conference on Neural Networks, May1998. C. C. Lee. Fuzzy logic in control systems: Fuzzy logic controller-part 1, IEEE trans. Syst., Man, Cybern., Vol. 20, pp. 404-418, 1990. John J. Grefenstette, “Optimization of control parameters for genetic algorithms”, IEEE Transaction on Systems, Man, Cybernetics, SMC-16(1):122-128, 1986. Eiben, A. E. et al (1994). "Genetic algorithms with multi-parent recombination". PPSN III: Proceedings of the International Conference on Evolutionary Computation. The Third Conference on Parallel Problem Solving from Nature: 78–87. ISBN 3540-58484-6. S. B. Kotsiantis, “Supervised Machine Learning: A Review of Classification Techniques”, Informatica (2007) 249-268. Kumar R. (2019) A New Approach to Train LSTMs, GRUs, and Other Similar Networks for Data Generation. In: Prateek M., Sharma D., Tiwari R., Sharma R., Kumar K., Kumar N. (eds) Next Generation Computing Technologies on Computational Intelligence. NGCT 2018. Communications in Computer and Information Science, vol 922. Springer, Singapore. D. J. C. MacKay. Information Theory, Inference, and Learning Algorithms. Cambridge University Press, 2003. A. Beygelzimer, S. Kakade, and J. Langford. Cover trees for nearest neighbor. In Proceedings of 23rd International Conference on Machine Learning (ICML 2006), 2006. W. Zhang and T.G. Dietterich (1995). A reinforcement learning approach to job-shop scheduling. In Proceedings of the International Joint Conference on Artificial Intelligence. | Page 104 of 112

Letters to the Editors Students weigh in on a solution for the North Korean Economy Introduction The “GAEE Essay Competition on the North Korean Economy” was hosted in October 2020 by the Global Association of Economics Education (GAEE) in association with the Youth Forum of North Korea Democratization (YFNKD), and with sponsorship from the Ministry of Unification of the Republic of Korea. With the intention of raising awareness on the North Korean economy, the contest provides middle-school and highschool students with the opportunity to demonstrate their understanding of the key aspects of the DPRK’s current state of the economy and the effects of future democratization on the country’s economy and its people. Participants will be expected to write an essay covering one of these topics:

1. Comparing North and South Korea’s economy; what are the structural advantages and disadvantages of each economy?; should there be a joint enterprise?; if investing in North Korea is allowed, which area would you invest in?; is there any country that were in a similar situation as North Korea that showed growth in the economy, and what is the possible way to do so?; what is the potential of North Korea’s economy in a free economy setting and what is the area with the most potential? 2. What would be the potential impacts of the liberalization of North Korea economy on employment, wages, productivity, and conditions of work. GJAE is pleased to feature some of the most thought-provoking responses to this competition in this issue’s letters to the editors section.

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Letter: North-South Joint Enterprises: A Pathway to the Peaceful Unification By Sunghyun Lee1 1North London Collegiate School, Edgware, United Kingdom

North Korea claims that its economic system is perfectly normal and stable. The majority of the North Korean propaganda and media, such as “with our race” (우리민쪽끼리), claim that South Korean and other capitalist economies could not catch up with North Korean economic growth. However, based on the statistics provided by the World Bank and the U.N., it seems like the South Korean economy is well above the economic development rate of North Korea. There have been constant observations that North Korean national economic income is significantly lower than any other Asian countries, due to several factors such as the unfair distribution of wealth, the dictatorship of Kim Jong-un, and even natural disasters. In order to effectively manage the North Korean economy to prepare for successful and efficient unification, there needs to be a constant comparison between these two states’ economies along with the establishment of joint enterprises. The South Korean economy rapidly developed after the Miracle of Han River in 1961 from developing countries. Before this economic miracle, the South Korean economy was still being focused on raw materials, similar to other developing countries, due to the aftermath of the Korean war and factories being destroyed. However, the government led by President Park began a New-village campaign, which rapidly increased the production rate of these major productions and political investment in new manufacturing industries. This enabled the South Korean economy to rapidly recover to a level where it could be a member of OECD. This constant economic growth and plans enabled South Korea to have various international industries that produce the majority of the construction materials, automobiles, and electric devices, such as Hyundai and Samsung. The South Korean economy also became diversified to ship-manufacturing industries and tourism services as it also installed airports and other transportation to expand its business to services. Currently, the South Korean economy has improved significantly to a level where Korean companies are installing secondary factories in foreign countries, such as Southeast Asia. However, the South Korean economy on the production of raw | Page 106 of 112

materials couldn’t be said to be successful since the majority of the raw materials manufacturing industries have either announced their bankruptcy or changed their main business areas to the new service areas. The South Korean economy also treats workers as important economic elements, which sometimes are used in various labor protests against their working environment or economic flaws, such as raising minimum wages. On the other hand, the North Korean economy is currently still based on the raw material industries since it didn’t have enough facilities or governmental support to expand and diversify its major economy. Instead, the government is only focusing on maintaining their authority, power, and economic wealth. For instance, while the majority of the North Korean teenagers are unable to go to public schools and receive a proper education, Kim’s family even received education from Ivy League schools and other foreign schools which don't have a free education system. The North Korean government also invests the majority of its annual income strictly on the preference of the ruling family, including the reform of the palace and invention of new weapons, including ICBM. As a result, the uneven distribution of wealth in North Korea is a serious issue that is currently an obstacle to North Korean economic growth. On the other hand, the North Korean economic system enables it to easily control the distribution of resources along with the life of citizens, since the government is the one who is responsible for passing the further legislations and deciding the next investments. This economic system has a decent advantage of the government being able to decide the next economic plan without any intervention or resistance from other political or labor organizations. Even if there are some workers who critically criticize the economic system, the government soon uses its secret police to arrest them and take them to rural areas, such as the Siberian plains, to force them to labor for the government away from their home. As a result, while the South Korean economy has an advantage of rapidly recovering and expanding its major economic source of income, the North Korean economy has the advantage of being able to easily control the economic activities of citizens along with absolute power of the government to utilize the annual economic source. These two advantages could be united and used together using the joint enterprise system. This enterprise could be managed by both North Korean and South Korean economists and | Page 107 of 112

officials, which is similar to the Shared-communication center. However, this shared enterprise mainly aims to establish a stable economic system that has both the advantages of North and South Korea from constant debate and discussion between North Korea and South Korean economists. These economists together propose various economic systems and generate the possible major advantages and disadvantages of each system or structure. These officials would also decide the most suitable economic system for unified Korea and predict the possible amount of money and other resources required for this system to be initiated. However, the challenge could be constantly seen, especially due to the ideological differences between the North and South Korean representatives. As North Korean citizens receive an education that justifies their current leader and dictatorial regime, some of the political officials could strongly disagree with establishing a close economic relationship with South Korea. Moreover, throughout constant meetings, these officials could also exchange their advanced technology or abundant amount of resources, which is one of the major successes in their current economic system. North Korean officials would receive manufacturing technologies that were developed from South Korea during the Miracle of Han River, while South Korean economists could receive abundant amounts of raw materials and other resources that could be found in South Korean regions. It could not be denied that there are some considerable differences in the economy of North and South Korea along with their ideological differences. However, this joint enterprise would decrease the size of the gap between their relationships and become an effective method to prepare for the unification of the Korean Peninsula. References “Size, Growth, and Structure of the North Korean Economy.” North Korean Paradoxes: Circumstances, Costs, and Consequences of Korean Unification, by Charles Wolf and Kamil Akramov, 1st ed., RAND Corporation, Santa Monica, CA; Arlington, VA; Pittsburgh, PA, 2005, pp. 9–20. JSTOR, Accessed 24 Nov. 2020.

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Kim, Youn Suk. “Current North Korean Economy: Overview and Prospects for Change.” North Korean Review, vol. 4, no. 2, 2008, pp. 16–30. JSTOR, Accessed 24 Nov. 2020. Lee, Young-Hoon. “Changes in the North Korean Economy Reported by North Korean Refugees.” North Korean Review, vol. 4, no. 2, 2008, pp. 49–57. JSTOR, Accessed 24 Nov. 2020. Eberstadt, Nicholas. Putting the North Korean Economy’s Epic Fail into Numbers. Asan Institute for Policy Studies, 2015, pp. 10–21, North Korea’s “Epic Economic Fail” in International Perspective, Accessed 24 Nov. 2020. Hart-Landsberg, Martin. “The South Korean Economy and U.S. Policy.” Asian Perspective, vol. 28, no. 4, 2004, pp. 89–117. JSTOR, Accessed 24 Nov. 2020. Kim, J. James, and Chungku KANG. South Korean Attitudes about ROK-Japan Relations on the Rocks. Asan Institute for Policy Studies, 2019, Accessed 24 Nov. 2020. Kalinowski, Thomas, and Min Joung Park. “South Korean Development Cooperation in Africa: The Legacy of a Developmental State.” Africa Spectrum, vol. 51, no. 3, 2016, pp. 61–75. JSTOR, Accessed 24 Nov. 2020.

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Letter: A boat in a storm By Daniel Kim Ho1 1Asian Pacific International School, Seoul & Hawaii

In July 27th 1953, the two Koreas signed an armistice to sever any previously existing ties for the next 60 years. Since making truce, a series of conflicts concerning nuclear proliferation and violation of human rights in North Korea have significantly deteriorated inter-Korean relations. However, with the recent Panmunjom Declaration, the divided nations have taken the big first step towards reunification. The Diplomat writes that “The Panmunjom Declaration assures the world that military action on the Korean Peninsula will not happen anytime soon”. Without doubt, the Panmunjom declaration has achieved an unprecedented feat- both Koreas settling for peace. Nevertheless, it is imperative to comprehend that the declaration specifies no imminent action, thus legitimizing President Moon’s urge to accelerate sequential processes towards lasting peace. For a comprehensive understanding of underlying post-war tensions, we must begin with the historical background in discrepancy of foreign policies. Previously, South Korea’s Sunshine Policy dominated inter-Korean relations. First implemented by President Kim Dae Joong in 1998, it aimed to bridge the wealth gap between the two Koreas through economic cooperation. However, due to the totalitarian regime of the North Korean government, the Sunshine Policy never brought significant change in alleviating economic problems. For the following years, provisional interactions- including temporary reunification of separated families to nuclear war threats from North Korea- occurred between the two governments. In this raging storm of missile threats and intimidation tactics, the Panmunjom Declaration emerged as a shining beacon of light. However, to successfully reach ashore, we must steer with caution; to establish lasting peace in the Korean peninsula, it is crucial that we prioritize gradual denuclearization, while maintaining positive relations with China and the US. Throughout history, denuclearization itself has never been a straightforward process. Similarly, North Korea’s president Kim Jong Un may be masking certain intentions by signing the Panmunjom Declaration. Thus, we should keenly be aware of any subsequent | Page 110 of 112

action violating the declaration. Gradual denuclearization of the peninsula requires two important factors to be addressed: lowering tensions along the DMZ and rebuilding North Korea’s economic sustainability. Currently, President Moon and President Kim have agreed to alleviate military tensions by eliminating any broadcasting loudspeakers or leaflets along the Demarcation line, and turn conflict-ridden areas in the West Sea into a maritime peace zone for fishing. Also, frequent meetings discussing future prospects of neutralizing areas around the demarcation line. On top of lowering tensions, North Korea’s economy has to reach a certain level where it would be able to support its own population. According to the Wall Street Journal from March 2 2018, “the impact [of trade sanctions] within North Korea is likely to intensify later this year as it runs short of foreign currency, and could trigger an economic crisis by 2019”. Continued sanctions will be detrimental to the North Korean economy and the denuclearization effort. Its economic stabilization can only be achieved through continual economic interactions between the divided nations in the form of foreign aid. From an international perspective, the implications of the Panmunjom Declaration extend to China and the US. It is imperative that quadrilateral summit meetings be arranged to resolve any national conflicts involving certain issues. Controversies dealing with the involvement of the US military in South Korea, as well as relief of China and North Korea trade sanctions, should specifically be emphasized in these meetings. Likewise, the Korea Times writes “The U.S. and China are discussing a possible withdrawal of a U.S. missile defense system from South Korea as part of a grand bargain over North Korea's nuclear program, multiple sources familiar with the talks said”. Agreements in such issues must be entrenched into the basis of international relations of the four nations to guarantee beneficent results for each nation and further ensure lasting peace in the Korean peninsula. Simply put, the current situation in the Korean Peninsula can be accurately represented by a boat in a storm; the Panmunjom Declaration is a strong sea breeze. If we successfully manage to ride the wind, we will arrive safely back ashore. However, it will not be an easy journey—thunderous waves will batter down the hull—but the key is to remain persistent. With the aid of foreign countries and continuous effort of the crew, we can watch the beautiful sunset on the seaside—the democratization of North Korea. | Page 111 of 112

Call to Action § The Submission Deadline for the GAEE Global Youth Policymaking Program is May 2nd. The program focuses on the challenges faced by democratization amidst

the COVID-19 pandemic and features a panel of judges that include Sir Ivor Roberts, U.S. Assistant Secretary of State Richard Boucher, Director of Oxford University Project on UN Governance Dr. Sam Daws, Director of Graduate Studies at the Blavatnik School of Government Dr. Maya Tudor, Professor of Princeton University School of Public and International Affairs Layna Mosley, etc. Fee waivers are available for participants from developing countries and lowincome students. § The Deadline to apply for the position of Editorial Assistant at GJAE has been extended to June 30th. Interested applicants are encouraged to contact as soon as possible to discuss eligibility and application process. § Scholars in the field of economics who want to democratize access to economics discourse among disadvantaged demographics are highly encouraged to join GJAE’s editorial board. Kindly contact for more information.

Thank you for reading the GAEE Journal for Aspiring Economists (GJAE). Contact GJAE at For general inquiries, please email Learn more about GAEE at | Page 112 of 112

ISSUE 2 | MAY 2021


“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” — Adam Smith, FRSA



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