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Dynamic risk sharing in the Central African Economic and monetary community

Author

Listed:
  • Laetitia P.SOKENG DONGFACK

    (Huazhong University of Science and Technology, School of Economics, China)

  • Hongbing OUYANG

    (Huazhong University of Science and Technology, School of Economics, China)

Abstract

In contrast to the first Optimum Currency Area (OCA) theory which was mostly about preventing currency areas’ exposure to asymmetric shocks, the second model introduced by Robert A. Mundell (1973) focuses on risk sharing across member states whenfacing adverse macroeconomic shocks. This paper explores how risk is shared across the six member states of the Central African Economic and Monetary Community (CEMAC). Using dynamic panel VAR, we measure disposable income and consumption smoothing of negative output shocks. We find that more than 72 percent of GDP idiosyncratic shocks remain unsmoothed in the case of the Central African currency area from 1986 to 2018

Suggested Citation

  • Laetitia P.SOKENG DONGFACK & Hongbing OUYANG, 2020. "Dynamic risk sharing in the Central African Economic and monetary community," Journal of Economics and Political Economy, EconSciences Journals, vol. 7(2), pages 80-100, June.
    • Handle: RePEc:cvv:journ1:v:7:y:2020:i:2:p:80-100
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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