Abstract
The objective of this article is to analyze the effects of procyclical variations of the capital requirements for risk coverage on financial stability in the CEMAC[1]. In order to achieve this objective, we have specified and estimated a panel VAR model using the structural factorization method on quarterly Central Bank data over the period 2006-2017. Firstly, the results show that procyclical capital adjustments in the CEMAC region lead to short-term financial instability through the contraction of credit to the private sector. Secondly, despite the low level of financial development, the effects maintained by the adjustment of monetary policy instruments in the short term remain significant on price stability. Finally, in the long term, the procyclicality of regulatory capital makes it possible to revive economic activity and guarantee financial stability. These results lead us to recommend the adoption of a more discretionary monetary policy so as to make more procyclical the capital requirement.
 
 
 [1] Economic Community of Central African States comprising Cameroon, Central African Republic, Chad, Congo, Gabon and Equatorial Guinea.
Highlights
The procyclicality of capital is understood in the context of a joint revaluation following a phase of economic expansion or a positive improvement of a given indicator (Tery, 2009)
This article aims to show in which cases the procyclical variation of the capital requirement according to economic constraints and risks can affect financial stability in CEMAC countries
By using structural restrictions on procyclical changes in regulatory capital, using data from the first quarter of 2006 to the fourth quarter of 2017, it appears that shocks to bank capital required and its procyclicality have a positive but small short-term impact on financial stability in the CEMAC region
Summary
The procyclicality of capital is understood in the context of a joint revaluation following a phase of economic expansion or a positive improvement of a given indicator (Tery, 2009). Period of the adoption of the Cooke ratio under the auspices of the Basel Committee on Banking Supervision (BCBS). Several banks saw their capital (including profits) negatively affected because they set aside provisions for credit losses during periods of recession. The economic downturn of 2000 showed a certain absence of procyclicality of the capital requirements, unlike the periods following the adoption of the Basel II ratio (Berenger and Teiletche, 2003). Capital under Basel II, Central African Republic, Chad, Congo, Gabon and Equatorial Guinea
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