Loss of Monetary Policy Autonomy and Public Attitude toward Monetary Union

The paper investigates the public’s attitude towards monetary union arrangements associated with different levels of monetary policy autonomy. The results indicate that support for monetary union declines significantly with expected loss of autonomy. Survey data from Kenya shows that public support for the proposed East African Community monetary union is highest in an arrangement where the country assumes the role of anchor and lowest where the country assumes a client role. A more favorable appraisal of the effects of monetary union by the public increases the likelihood of voting for a multilateral monetary union but decreases the likelihood of voting for a client role in a unilateral dollarization arrangement. This suggests that for countries without clear differences in monetary policy credibility, but with political systems where voter preferences matter, multilateral monetary union would be a more stable arrangement.