The Portuguese escudo area in Africa and its lessons for monetary unions

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The beginnings of the Portuguese Escudo Monetary Zone (EMZ) in 1961, to promote the economic integration of Portugal and its empire, coincide in time with Mundell’s seminal paper about optimum currency areas. If non-optimality was the cause of the EMZ’s demise. This would suggest that monetary unions are fragile achievements, with little prospect for survival. The EMZ turned out to be a short-lived experiment, with Angola and Mozambique building up large cumulative deficit positions offset by the sizeable cumulative surpluses of the mainland. A cobweb model using monthly observations for macroeconomic variables of these two territories describes a time divergent process caused by structural imbalances, as well as by the loan granting system. The EMZ was not an optimum currency area and was not sustainable in the long run. This is an historical experiment that is not without interest for the study of other monetary areas.

Original languageEnglish
Pages (from-to)392-421
JournalEconomic History of Developing Regions
Issue number3
Publication statusPublished - Dec 2021


  • Optimal currency areas
  • partners’ indebtedness
  • Portuguese colonial empire
  • sustainability of monetary unions
  • the escudo monetary zone


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