IDEAS home Printed from https://ideas.repec.org/a/wly/jintdv/v23y2011i1p63-81.html
   My bibliography  Save this article

Monetary autonomy in the West African countries: What do the policy rules tell us?

Author

Listed:
  • Gilles Dufrénot

Abstract

This paper provides an empirical assessment about how the monetary policy has been made in a group of Sub-Saharan African countries that are members of the CFA Franc zone. We question the argument that being a member of the CFA zone has always implied the loss of monetary policy autonomy. We use two definitions of monetary autonomy. In a first sense, we consider the African central bank's' ability to set their policy instruments endogenously, in regard to the local economic situations prevailing in the CFA zone, and not only in accordance with the monetary policy followed by the anchor zone. In a second sense, we interpret autonomy in a narrow sense, meaning that money creation is backed by the inflow of foreign exchange reserves as is usually the case for a currency board. These two definitions are used alternatively to test the hypothesis of monetary autonomy through the estimations of an interest rate and credit growth rules. We focus our attention on the West African Economic and Monetary Union (WAEMU) countries, where the upholding of the CFA zone is today passionately debated among the economists. Our results suggest a mixed evidence of autonomy. On the one hand, by considering the interest rate instrument, we provide some evidence that the BCEAO did not completely import its interest rate policy from France and the Euro zone, up until the 1994 devaluation. In addition to the Bank of France's discount rate and the inflation differential with Europe, the domestic interest rate has also been fixed in regard to variables such as growth, the real exchange rate and changes in foreign reserves. Until 1994, there seems however to be strong signs of loss of autonomy. On the other hand, we examine the responsiveness of credit planning to changes in foreign reserves and conclude against the hypothesis of autonomy over the whole period. Even more, credit policy has become more restrictive since the 1994 devaluation. Copyright (C) 2009 John Wiley & Sons, Ltd.

Suggested Citation

  • Gilles Dufrénot, 2011. "Monetary autonomy in the West African countries: What do the policy rules tell us?," Journal of International Development, John Wiley & Sons, Ltd., vol. 23(1), pages 63-81, January.
  • Handle: RePEc:wly:jintdv:v:23:y:2011:i:1:p:63-81
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1002/jid.1631
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fadia Al Hajj & Gilles Dufr??not, & Kimiko Sugimoto & Romain Wolf, 2013. "Reactions to Shocks and Monetary Policy Regimes: Inflation Targeting Versus Flexible Currency Board in Ghana, South Africa and the WAEMU," William Davidson Institute Working Papers Series wp1062, William Davidson Institute at the University of Michigan.

    More about this item

    Keywords

    monetary autonomy ; policy rules ; African countries ; CFA zone ; C5 ; E5 ; O2 ;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:jintdv:v:23:y:2011:i:1:p:63-81. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://www3.interscience.wiley.com/journal/5102/home .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.