Abstract
Assessing the economic efficiency of countries’ participation to a currency union has become a relevant topic since the introduction of the Optimum Currency Area (OCA) theory by Mundell (1961). This paper attempts to evaluate the performance of the Central African Economic and Monetary Community (CAEMC) as a currency union in the context of exposure to asymmetric shocks. We first identify structural macroeconomic shocks within the region using the Blanchard and Quah Method. We find that aggregate demand shocks fluctuations display more symmetric patterns than those of aggregate supply shocks. Chad is the apparent outlier, as it is the only economy in the monetary union to experience negative supply shocks. This suggests that the loss of monetary sovereignty might result in significant adjustment costs.
Highlights
Discussion about the CFA Franc and the role it plays in the dependence of francophone African countries to their former colonial power France, are raising some controversies as well as public concern about the risk of currency devaluation
Concluding Remarks Our study aims to identify macroeconomic shocks within the Central African Economic and Monetary Community (CAEMC), in order to determine whether or not the currency area is exposed to asymmetric shocks, threatening its optimality
By observing output growth and inflation impulse responses to structural shocks, we conclude that all the CAEMC countries are hit by adverse demand shocks, causing output and price to move in the same direction
Summary
Journal of Economics and Public Finance ISSN 2377-1038 (Print) ISSN 2377-1046 (Online). Asymmetric Shocks Patterns in the Central African Economic and Monetary Community. Sokeng Dongfack1* 1 School of Economics, Huazhong University of Science and Technology, Wuhan, PRC * Laetitia P. Sokeng D., School of Economics, Huazhong University of Science and Technology, Wuhan, PRC
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.