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Business Cycle Synchronization: A Reassessment of the Optimum Currency Area Theory within the CFA Franc Zone

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  • Michel Cyrille Samba
  • Christophe Mbassi

Abstract

he main purpose of this paper is to assess the synchronization of business cycles within the Franc zone countries for the period 1990–2013. For this purpose, we use supply and demand shocks and then construct an indicator of dispersion. Our results suggest that supply shocks in the CFA Franc zone tend to be symmetric after the year 2000. In contrast, Franc zone member states seem to have become more and more different and exposed to asymmetric demand shocks, especially after the year 2000. Results based on the computation of an indicator of dispersion highight the existence of business cycle synchronization in terms of demand shocks during the period of study. On their part, supply shocks appear to be synchronized only after the year 2000. Finally, a great number of countries still incur important costs due to their membership of the currency union and are consequently a source of cyclical divergence.

Suggested Citation

  • Michel Cyrille Samba & Christophe Mbassi, 2020. "Business Cycle Synchronization: A Reassessment of the Optimum Currency Area Theory within the CFA Franc Zone," Journal of African Business, Taylor & Francis Journals, vol. 21(1), pages 126-144, January.
  • Handle: RePEc:taf:wjabxx:v:21:y:2020:i:1:p:126-144
    DOI: 10.1080/15228916.2019.1607143
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