Central African Economic And Monetary Community Research Articles

Resilience of Developing Economies to External Shocks: Empirical Evidence from CEMAC Countries

This study explores the effects of the 1994 CFA currency depreciation, the 2008 Global Financial Crisis (GFC), and instances of political coups on the relationships between FDI inflow, economic growth, and governance in the Central African Economic and Monetary Community (CEMAC) countries. By examining the impact of these events on FDI, growth, and governance, this paper provides important details of responses to external shocks and internal political disruptions. We employ panel VAR analysis with data from 1990 to 2019 to explore the dynamic relationships among these variables. The results show that growth and governance are not determining factors for attracting FDI in the CEMAC sub-region. Governance, on the other hand, stands as a determining factor for growth. Our findings also suggest that the 1994 CFA currency depreciation, 2008 GFC, and coups had no significant impact on FDI, growth, and governance. Although these events’ effects may expose the countries’ vulnerability to external shocks influencing the dynamics of FDI, economic growth, and governance, their impact did not seem to be evident. However, political instability, evidenced by coups, emerges as a crucial factor shaping the interactions between FDI, growth, and governance in CEMAC countries. Our analysis was conducted using the EViews software package.

The Effect of Policy Uncertainty on Money Demand in CEMAC Countries

The aim of this paper is to investigate the long run effect of policy uncertainty on money demand for Central African Economic and Monetary Community (CEMAC) countries over the period 1985-2017. We consider a more inclusive measure of policy uncertainty that encompass uncertainty related to economic and political events. Our measure of policy uncertainty is taken from the World Uncertainty Index (WUI) developed by the Policy Uncertainty Group. To estimate the money demand function, we employs panel data estimators that address issues of cross-sectional dependence and parameter heterogeneity. The estimates establish evidence of the long-run relationship between money demand and its determinants. It appears that the demand for domestic money increases with real income meanwhile decreases with the inflation rate. And so, the opportunity cost of holding money is reflected in the rate of inflation. The results associated to the exchange rate show that currency substitution does not hold in the long-run for the sample considered. The most important result is that policy uncertainty has an adverse long-term effect on money demand for CEMAC countries. Our results are robust to alternative panel estimation approaches. Thus, increased uncertainty leads people to hold less cash, while decreased uncertainty leads them to hold more cash.

Effects of Banking Provisions on the Quality of Assets of Commercial Banks in the Central African Economic and Monetary Community (CEMAC): An Application by the Generalized Moments Method (GMM)

Effects of Banking Provisions on the Quality of Assets of Commercial Banks in the Central African Economic and Monetary Community (CEMAC): An Application by the Generalized Moments Method (GMM)

Good governance and poverty alleviation in the cemac sub-region: A fixed effect model with driscoll-kraay standard errors technique

Good governance is paramount for the government of each country to reduce poverty and achieve their growth objectives. However, due to corruption, political instability, and government ineffectivesness, the quality of governance indicators has fail in most countries expecially those in the Central African Economic and Monetary Community (CEMAC). Thus, the objective of this study was to examine the effect of good governance on poverty reduction in the CEMAC sub-region using World Bank data from 1996 to 2021. Due to multicollinearity and parsimonious model, four governance indicators were examine in the study; voice and accountability (vacc), government effectiveness, corruption, and political stability while household consumption expenditure (HCE) was use as a measure of poverty allevation. The study face the problem of cross-sectional dependence and heteroscedasticity. Hence, it employs the fixed effect model with Driscoll-Kraay standard errors regression. The results indicate that vacc and government effectiveness have a positive and significant impact on poverty reduction while corruption and political stability have a negative effect. This indicates that good governance is vital in reducing poverty and boosting the livelihood of the population in CEMAC sub region. The study recommends that CEMAC member countries should step up the quality of their governance indicators such as eradication of corruption, effectiveness in governance, and adopts results based financing.

Does Inflation Contribute to Economic Growth: The Case of CEMAC (Central African Economic and Monetary Community)

This paper focuses on the influence of inflation on economic growth to determine the extent to which the fight against inflation can contribute to the economic growth of a country or a regional zone such as CEMAC. We identify the effects of inflation on the CEMAC zone and use a multiple linear regression model to test the relationship between the two economic quantities: inflation and economic growth. We mainly used Stata 13 software to obtain the results and a sample of panel data, including six CEMAC member states, namely Congo, Cameroon, Gabon, Equatorial Guinea, Central African Republic, and Chad, from 2000 to 2018. The results were found to show a positive relationship between inflation and economic growth. These results indicate that the coefficients of the explanatory variables have the expected signs. However, other coefficients, up to 10%, are insignificant, notably GDP growth and consumer price inflation. The estimated values of all variables are in %, so we can say that if consumer price inflation increases by 10%, GDP growth will decrease by 10%. Then the value of GDP deflator inflation is positive, so if GDP deflator inflation increases by 1%, GDP will decrease by 0.11%. Its probability value is insignificant, and the money supply has a statistically insignificant effect on GDP growth. Finally, the results of the descriptive analysis show that GDP, consumer price inflation, the inflation deflator, the money supply, and foreign direct investment move in the same direction and the regression shows that there is a positive and significant link between the degree of openness to inflation and economic growth in the CEMAC zone. The econometric analysis allowed us to show that price increases (inflation) have a significant influence on growth.

Determinants of the Attractiveness of Private Capital in the Central African Economic and Monetary Community (CEMAC)

The objective of this paper is to identify the factors of attractiveness of private capital flow (foreign direct investment and portfolio investment) in CEMAC over the period 2005-2019. To do so, we used the generalized moment model (two-step system and the static CGM model). Our main results show that the selected variables have positive and negative impacts on capital inflows into CEMAC. This implies improving the business climate, easing administrative procedures, and encouraging and facilitating the creation of businesses in order to make the sub region more attractive.

Determinants of the Attractiveness of Private Capital in the Central African Economic and Monetary Community (CEMAC)

Determinants of the Attractiveness of Private Capital in the Central African Economic and Monetary Community (CEMAC)

Asymmetric financial support and risk of non-repayment of bank loans: An analysis in the CEMAC context

The aim of this article is to determine the factors contributing to the increase in the risk of non-repayment of bank loans in financing relationships in the Central African Economic and Monetary Community (CEMAC) zone. Analysis of data from reports by the Central African Banking Commission (COBAC) has established these various factors. A summary of the analyses reveals that the presence of information asymmetry in the relationship leads the bank and the company to give priority to personal interests (Mbama, 2022). The proposed solution encourages both parties to promote reciprocal and benevolent behaviour in order to create mutual trust in the relationship and reduce the existing information asymmetry. Overall, solving the problem of loan default requires a multi-faceted approach (Porretta et al., 2020). This involves raising collective awareness, improving the regulatory framework, strengthening the financial management capabilities of businesses, and introducing more effective risk control systems by banks (Hertouch & Achibane, 2020). By taking these measures, it is possible to create a more favourable environment for businesses to prosper and contribute to the sub-region’s economic development.

Effects of Political Institutions on Economic Growth in CEMAC Member Countries

The objective of this article is to analyze the effects that political institutions can have on economic growth in the Central African Economic and Monetary Community (CEMAC) zone after asking the question of what are the effects of political institutions on economic growth in the CEMAC zone? In this work, we support the hypothesis that the quality of political institutions is not neutral in the performance recorded by CEMAC countries in terms of economic growth. This analysis is based on World Bank World Development Indicators (WDI) data covering the period from 2002 to 2019 and concerns all member countries of the CEMAC zone, except Gabon. The choice of research period and countries was dictated by data availability. To do this, an empirical analysis that highlights the link by the PSTR model which is based on two stages was adopted. This is the verification of the existence or not of a nonlinear relationship and the detection of the number of regimes of the model. It remains from the results obtained that the variables relating to political institutions have a marginal effect on economic growth in the CEMAC countries, because the coefficients associated with these variables are not significant at the 10% threshold. These results suggest that institutional factors (rule of law, political stability and absence of violence and control of corruption) appear as neutral factors in economic growth. These results can be explained by the fact that the quality of governance despite reforms in CEMAC member countries is still weak to support economic growth. These results confirm those obtained by Sievers (2001) who gave a rather mixed assessment of institutions in African countries.

Analysing the Flow of Intra-Industry Trade in the Central African Monetary Community

This paper empirically examines the flow of Central African Economic and Monetary Community (CEMAC) intra-industry trade at different sectors and product categories using the Standard International Trade Classification (SITC). An augmented gravity model of trade was adopted to analyse changes in the different sectors and product categories from 1995 to 2015; this is the time span for which consistent and useable time series data is available for CEMAC. A time fixed effects variable and within estimator were included to control for unpredictable changes in exogenous factors and capture the heterogeneity of the sample over time. The results showed that prior to the formation of the CEMAC customs union, the growth in intra-industry trade had been higher than that of the CEMAC customs union with the exception of very few sectors and that since the establishment of the customs union in 1994, IIT trade has remained low and only Cameroon has witnessed an increase in trade with member states, especially in food and live animals. The results also showed that only mineral fuels exports had been significant and positive for Chad and Equatorial Guinea.

Has bank credit really impacted agricultural productivity in the Central African Economic and Monetary Community?

PurposeThis paper investigates the impact of bank credit on agricultural productivity in the Central African Economic and Monetary Community (CEMAC) from 1990 to 2019. Studies’ results on the impact of bank credit on agricultural productivity are not conclusive. The studies demonstrate diverse outcomes which are debatable. The results are conflicting.Design/methodology/approachAgricultural value added (AGRVA) to the gross domestic product (GDP) proxies agricultural productivity while domestic credit to the private sector by banks (DCPSB), broad money supply, land, inflation (INF), physical capital (PHKAP) and labour supply are explanatory variables. The autoregressive distributed lag technique is utilized.FindingsThe co-integration test results show a long-run co-integration among the variables. The findings disclose that DCPSB, land and PHKAP impact positively on the AGRVA. Broad money supply, INF and labour impact negatively on the AGRVA to the GDP.Research limitations/implicationsThe results suggest that the CEMAC governments should encourage effective ways to increase bank credit flow to private enterprises in the agricultural sector through efficient bank's intermediation.Practical implicationsThe governments should create more agricultural banks and improve the operation of existing ones to ensure direct credit to agricultural activities. The Bank of Central African Economic and Monetary Community should apply aggressive policy which eliminates all the bottlenecks undermining credit flow to the private sector in mutualism with agricultural productivity.Social implicationsThe commercial banks should give more credit to private sector to mutually benefit the agricultural sector and the banking sector. The governments of the CEMAC economies should expand funding into the capital market which considerably boosts agricultural productivity.Originality/valueStudies’ results on the impact of bank credit on agricultural productivity are not conclusive. The studies demonstrate diverse outcomes which are debatable. The results are conflicting; some reveal positive impacts, some show negative impacts and others indicate U-shape behaviour. Hence, research is required to fill the lacuna.

Understanding the Performance of the Banking System in Times of Crisis: the Case of Commercial Banks in the CEMAC

This article aims to explain the performance of the banking system in the Central African Economic and Monetary Community (CEMAC) during a crisis period by exploring the average value of the bank profitability indicator. A comparative reading of this indicator between 1986 and 2020 shows that profitability during a crisis period is higher than during the normal period. Using an analysis of the model of banking performance with the method of generalized moments (GMM), the results show that the contradiction relating to the banking performance is explained by: 1)- the strong presence of the State in the capital of commercial banks in the CMEAC zone during the crisis; 2)- the decline in liquidity characteristic of crisis periods also explains this performance of the CEMAC banking sector. It is recommended that the monetary authorities ensure that their decisions are strictly applied by commercial banks in normal times as well as in times of crisis

Road infrastructure and intra-community trade in the Central African Economic and Monetary Community

We examine the contribution of domestic and interstates road infrastructures to trade flow between member countries of the Central African Economic and Monetary Community (CEMAC). Theories of international economics as well as those of the new economic geography suggest a positive contribution of both road infrastructures to intraregional trade. A gravity model of international trade is estimated to evaluate this theoretical prediction in the CEMAC zone. Results confirm a positive contribution of interstate road infrastructure to intra-Community trade, but show no evidence of a positive contribution of domestic road infrastructure to intra- CEMAC trade.

An empirical analysis of the impact of banking regulations on sustainable financial inclusion in the CEMAC region

Based on a panel analysis of six countries over the period 2004–2018, this study examines the impact of financial regulation on sustainable financial inclusion (FI) in the Central African Economic and Monetary Community (CEMAC) region. Using different approaches to estimate FI, we find that banking regulation has a positive impact on FI. In particular, our findings suggest that regulations for monitoring entry into the financial sector, external reporting and audits, and deposit insurance contribute sustainably to an increase in FI. In addition, banking regulations help the region to attract foreign direct investment and boost economic growth. An important policy implication of this paper is that CEMAC regulators should enhance synergy with mobile telephone network providers to promote digital FI, as it offers a low-cost option for promoting FI, especially for people living in areas underserved by mainstream financial institutions.

Effects of Investments on the Economic Diversification of the States of the Central African Economic and Monetary Community (CEMAC)

This study aims to answer the question of whether investments have an effect on the economic diversification of the countries of the Economic and Monetary Community of Central Africa (CEMAC). The panel data used cover the period 1995-2019 and are extracted from the UNCTAD, WGI and WDI databases of the World Bank. To address the research question, we used panel data econometrics. The results obtained show that private investment improves economic diversification, while public investment hinders economic diversification in the CEMAC. These results imply 1) the need to enhance the attractiveness of private investment in all sectors of the economy and 2) the importance of improving state governance through a shift from the rentier to the developmental state.

Impact of Market Concentration on the Stability of the Banking Sector in the Central African Economic and Monetary Community (CEMAC)

The objective of this paper is to analyze the impact of banking market concentration on the stability of the banking sector in the Economic Community of Central African States (CEMAC). Using panel data from 2005 to 2015 and the system GMM technique, it is found that deposit and credit market concentration have a destabilizing effect on the banking system. Thus, it would be desirable to put in place mechanisms that can help reduce the market power of certain banks to guarantee banking stability.

The Short and Long Run Dynamics of Monetary Policy, Oil Price Volatility and Economic Growth in the CEMAC Region

The effects of shocks on oil prices will always attract the interest of researchers and policy makers as long as such countries are oil revenue dependent. This is the case in the Central African Economic and Monetary Community (CEMAC) where 70% of the regional countries are net oil income earners. In this study, an in-depth investigation was carried out on the short and long run dynamics between monetary policy, oil price volatility and economic growth in the oil producing CEMAC countries. The target countries are Cameroon, Chad, the Democratic Republic of Congo, Equatorial Guinea, Gabon and the Republic of Congo, and the data for the study covered 1980-2018, a period of 38 years. The study employed the panel autoregressive distributed lag model for the short- and long-run dynamics, while a structural vector autoregressive (SVAR) model was employed for shocks and spillover effects. The results identified oil price volatility, GDP growth rate and exchange rate as highly influential variables in the long run, while exchange rate and GDP growth rate only have significant short run influences on monetary policy rates in the region. The countries of the region need to intensify efforts towards the diversification of individual economic base, reduce the importation of foreign goods and formulate monetary policies that will strengthen their currencies and boost the growth potential in the communities.

Natural Resources and Fiscal Policy in CEMAC: The Role of Institutional Quality

This article aims to analyze the effects of institutional quality through natural resource rents on the orientation of fiscal policy in the Central African Economic and Monetary Community (CEMAC). The methodology adopted for this purpose is based on panel data (over the 1996-2016 period) and the GMM system estimator. The results show that natural resource rents are a means by which institutional quality affects the orientation of fiscal policy. Indeed, economic and institutional governance complements natural resource rents in the countercyclical orientation of total public spending. Thus, there is an absence of the indirect effects of institutional quality on the orientation of total public revenue behavior. Similarly, during natural resource booms, the orientation of total public spending remains countercyclical. Thus, political and institutional governance reinforces the effects of natural resource booms on the countercyclical orientation of total public spending. With regard to the decline in natural resource rents, total public spending remains countercyclical. Only institutional governance reinforces the effects of the decline in natural resource rents on the countercyclical nature of total public spending. Thus, the procyclical orientation of the behavior of total public revenue remains, regardless of whether there are periods of boom or collapse in natural resource rents. Political governance amplifies the effects of the decline in natural resource rents on the procyclical behavior of total public revenue. These results lead to economic policy implications.

Effects of the Oil Shocks, Interest Rate, and Current Account Balance on the Sovereign Debt of CEMAC Member Countries

The objective of this paper is to analyze the effects of oil shocks, interest rates and balance of payment on the sovereign debt of member countries of the Central African Economic and Monetary Community (CEMAC) from 1998 to 2018 using the nonlinear autoregressive distributed lag (NARDL) method. The obtained results demonstrate short- and long-term asymmetric relationships among oil shocks, interest rate, and balances of payment on the sovereign debts of these countries. A positive long-term shock increases sovereign debt, while debt services deteriorate during negative short-term shocks, which demonstrates the procyclical behavior of the debt of these countries. These results enable us to formulate implications for economic policies to improve budget management and diversify the economy.

Relationship between methane emissions and economic growth in Central Africa countries: Evidence from panel data

Methane (CH4) is a greenhouse gas with a warming potential 28 times that of dioxide of carbon (CO2) and Africa alone contributes more than 1/3 of global methane emissions. Considering the fact that Africa has the second largest hydro-forest basin in the world after the Amazon and is highly dependent on agriculture, this study examines the effects of economic growth on environmental quality in an Environmental Kuznets curve (EKC) framework. It empirically tests the relationship between CH4 emissions and GDP per capita (GDPC) for six countries of Central African Economic and Monetary Community (CEMAC) over the period 1980 to 2018. Using the Driscoll-Kraay standard errors technique as well as panel Granger non-causality test, the results point out cointegration between CH4 emissions and GDPC, show that there is bidirectional causality between the two variables and support evidence of EKC hypothesis. Policymakers should strengthen sustainable strategies for growth and environment.