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Real and Monetary Policy Convergence: EMU Crisis to the CFA Zone

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  • Asongu Simplice

    ()
    (Yaoundé/Cameroun)

Abstract

Purpose – A major lesson of the EMU crisis is that serious disequilibria result from regional monetary arrangements not designed to be robust to a variety of shocks. The purpose of this paper is to assess these disequilibria within the CEMAC, UEMOA and CFA zones. Design/methodology/approach – In the assessments, monetary policy targets inflation and financial dynamics of depth, efficiency, activity and size while real sector policy targets economic performance in terms of GDP growth. We also provide the speed of convergence and time required to achieve a 100% convergence. Findings – But for financial intermediary size within the CFA zone, findings for the most part support only unconditional convergence. There is no form of convergence within the CEMAC zone. Practical implications – The broad insignificance of conditional convergence results have substantial policy implications. Monetary and real policies which are often homogenous for member states are thwarted by heterogeneous structural and institutional characteristics which give rise to different levels and patterns of financial intermediary development. Therefore member states should work towards harmonizing cross-country differences in structural and institutional characteristics that hamper the effectiveness of monetary policies. Originality/value – The paper provides warning signs to the CFA zone in the heat of the Euro zone crises.

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File URL: http://www.afridev.org/RePEc/agd/agd-wpaper/Real-and-Monetary-Policy-Convergence.-EMU-Crisis-to-the-CFA-Zone.pdf
File Function: Revised version, 2013
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Bibliographic Info

Paper provided by African Governance and Development Institute. in its series Working Papers with number 12/033.

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Length: 25
Date of creation: 19 Jan 2012
Date of revision:
Publication status: Published in the Journal of Financial Economic Policy
Handle: RePEc:agd:wpaper:12/033

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Keywords: CFA Zone; Currency Area; Convergence; Policy Coordination;

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References

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  1. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  2. Asongu Simplice, 2011. "Finance and Democracy in Africa," Working Papers, African Governance and Development Institute. 11/020, African Governance and Development Institute..
  3. Simplice A., Asongu, 2011. "New financial intermediary development indicators for developing countries," MPRA Paper 30921, University Library of Munich, Germany.
  4. Simplice A., Asongu, 2011. "Law and finance in Africa," MPRA Paper 34080, University Library of Munich, Germany.
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  7. Giuseppe Bruno & Riccardo De Bonis, 2009. "Do Financial Systems Converge?: New Evidence from Household Financial Assets in Selected OECD Countries," OECD Statistics Working Papers, OECD Publishing 2009/1, OECD Publishing.
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  11. Simplice A., Simplice, 2011. "Why do French civil-law countries have higher levels of financial efficiency?," MPRA Paper 33950, University Library of Munich, Germany.
  12. Simplice A., Asongu, 2011. "Law, finance, economic growth and welfare: why does legal origin matter?," MPRA Paper 33868, University Library of Munich, Germany.
  13. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(4), pages 1127-70, November.
  14. Agnès Bénassy-Quéré & Maylis Coupet, 2005. "On the Adequacy of Monetary Arrangements in Sub-Saharan Africa," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 28(3), pages 349-373, 03.
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  17. George M. von Furstenberg & Bang Nam Jeon, 1989. "International Stock Price Movements: Links and Messages," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 125-180.
  18. Bruno, Giuseppe & De Bonis, Riccardo & Silvestrini, Andrea, 2012. "Do financial systems converge? New evidence from financial assets in OECD countries," Journal of Comparative Economics, Elsevier, vol. 40(1), pages 141-155.
  19. Brada, Josef C. & Kutan, Ali M. & Zhou, Su, 2005. "Real and monetary convergence between the European Union's core and recent member countries: A rolling cointegration approach," Journal of Banking & Finance, Elsevier, Elsevier, vol. 29(1), pages 249-270, January.
  20. Bessler, David A. & Yang, Jian, 2003. "The structure of interdependence in international stock markets," Journal of International Money and Finance, Elsevier, Elsevier, vol. 22(2), pages 261-287, April.
  21. Fung, Michael K., 2009. "Financial development and economic growth: Convergence or divergence?," Journal of International Money and Finance, Elsevier, Elsevier, vol. 28(1), pages 56-67, February.
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