Term of Trade Shocks in a Monetary Union: an Application to West-Africa
AbstractWe propose a two-country DSGE model of the Dutch disease in a monetary union, calibrated on Nigeria and WAEMU. Three monetary regimes are successively studied at the union level: a flexible exchange rate with constant money supply, a flexible exchange rate with an accommodating monetary policy, and a fixed exchange rate regime. We find that, in the face of oil shocks, the most stabilizing regime for Nigeria is a fixed money supply whereas it is a fixed exchange rate for WAEMU. However, the introduction of an oil stabilization fund can reduce the disagreement on the common policy rule. Furthermore, the two zones may agree on a fixed money-supply rule in the face of both oil and agricultural price shocks.
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Bibliographic InfoPaper provided by CEPII research center in its series Working Papers with number 2009-07.
Date of creation: Apr 2009
Date of revision:
Dutch disease; DSGE; Monetary union; Optimal monetary policy;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
This paper has been announced in the following NEP Reports:
- NEP-AFR-2009-04-13 (Africa)
- NEP-ALL-2009-04-13 (All new papers)
- NEP-CBA-2009-04-13 (Central Banking)
- NEP-DEV-2009-04-13 (Development)
- NEP-DGE-2009-04-13 (Dynamic General Equilibrium)
- NEP-MAC-2009-04-13 (Macroeconomics)
- NEP-MON-2009-04-13 (Monetary Economics)
- NEP-OPM-2009-04-13 (Open Economy Macroeconomic)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- van Wijnbergen, Sweder, 1984. "Inflation, Employment, and the Dutch Disease in Oil-Exporting Countries: A Short-Run Disequilibrium Analysis," The Quarterly Journal of Economics, MIT Press, vol. 99(2), pages 233-50, May.
- Budina, Nina & Pang, Gaobo & van Wijnbergen, Sweder, 2007. "Nigeria's growth record : Dutch disease or debt overhang ?," Policy Research Working Paper Series 4256, The World Bank.
- Mohamed Tahar Benkhodja, 2011.
"Monetary Policy and the Dutch Disease in a Small Open Oil Exporting Economy,"
1134, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
- Mohamed Tahar Benkhodja, 2011. "Monetary Policy and the Dutch Disease in a Small Open Oil Exporting Economy," Working Papers halshs-00654511, HAL.
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