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What Determines Monetary Policy in the Franc Zone? Estimating a Reaction Function for the BCEAO

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  • Anja Shortland
  • David Stasavage

Abstract

This paper examines to what extent the central bank for the West African Economic and Monetary Union (BCEAO) has used interest rate policy in response to domestic economic developments. We show that while in the long run the BCEAO matches changes in French (Eurozone) interest rates one for one, in the short run it retains freedom to react to domestic economic variables, such as inflation, the output gap, its foreign exchange position and government borrowing. Copyright 2004, Oxford University Press.

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  • Anja Shortland & David Stasavage, 2004. "What Determines Monetary Policy in the Franc Zone? Estimating a Reaction Function for the BCEAO," Journal of African Economies, Centre for the Study of African Economies, vol. 13(4), pages 518-535, December.
    • Handle: RePEc:oup:jafrec:v:13:y:2004:i:4:p:518-535
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    1. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
    2. Stasavage, David, 1997. "The CFA Franc Zone and Fiscal Discipline," Journal of African Economies, Centre for the Study of African Economies, vol. 6(1), pages 132-167, March.
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    Cited by:

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    2. Caporale, Guglielmo Maria & Helmi, Mohamad Husam & Çatık, Abdurrahman Nazif & Menla Ali, Faek & Akdeniz, Coşkun, 2018. "Monetary policy rules in emerging countries: Is there an augmented nonlinear taylor rule?," Economic Modelling, Elsevier, vol. 72(C), pages 306-319.
    3. Souleymane NDAO & Nikolay Nenovsky, 2020. "External Dependence of the African Franc CFA zone. Empirical Investigations on Money Supply Process," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 3, pages 357-367, September.
    4. Wasim Shahid Malik, 2007. "Monetary Policy Objectives in Pakistan: An Empirical Investigation," PIDE-Working Papers 2007:35, Pakistan Institute of Development Economics.
    5. João Loureiro & Evaldo Baptista, 2021. "A single currency for the Economic Community of West Africa? An economic assessment," South African Journal of Economics, Economic Society of South Africa, vol. 89(4), pages 608-634, December.
    6. Lee A. Smales, 2013. "The Determinants of RBA Target Rate Decisions: A Choice Modelling Approach," The Economic Record, The Economic Society of Australia, vol. 89(287), pages 556-569, December.
    7. Mr. Romain M Veyrune, 2007. "Fixed Exchange Rates and the Autonomy of Monetary Policy: The Franc Zone Case," IMF Working Papers 2007/034, International Monetary Fund.
    8. Ghatak, Subrata & Moore, Tomoe, 2008. "Monetary policy rules for transition economies: an empirical analysis," Economics Discussion Papers 2008-5, School of Economics, Kingston University London.
    9. Shesadri Banerjee, 2013. "Inflation Volatility and Activism of Monetary Policy," CEGAP Working Papers 2013_06, Durham University Business School.

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    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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