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Financial Deepening Dynamics and Implication for Financial Policy Coordination in a Monetary Union: the case of WAEMU

Author

Listed:
  • Christian Lambert Nguena

    (Association of African Young Economists)

  • Roger Tsafack Nanfosso

    (Econimic Policy Management Program)

Abstract

This article aims to investigate the implication of financial deepening dynamics for financial policy coordination in the WAEMU sub-region. For this purpose we adopted a hypothetical-deductive theoretical approach and an empirical investigation in bothstatic and dynamic panel data econometrics that has allowed us to identify some stylized facts on this issue and have led to the following global recommendations based on our empirical investigation: The converging dynamics is evident in the sub-region and implies that after five years, financial policies harmonization would have an optimal impact; This highlights the feasibility of common effectiveness monetary policy targeting indirectly financial depth in the sub-region; However member states should work within five years towards harmonizing cross-country differences in structural and institutional characteristics that hamper the effectiveness of financial policies. Especially they should implement a financial policy whose mainly aim to increase the level of savings rate, GDP per capita growth rate and density and reduce the level of reserves in the sub-region.

Suggested Citation

  • Christian Lambert Nguena & Roger Tsafack Nanfosso, 2013. "Financial Deepening Dynamics and Implication for Financial Policy Coordination in a Monetary Union: the case of WAEMU," AAYE Policy Research Working Paper Series 5, Association of African Young Economists, revised Nov 2013.
    • Handle: RePEc:aay:wpaper:5
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    File URL: http://aaye.org/dmdocuments/AAYE_PR_WPS_N5.pdf
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    More about this item

    Keywords

    Economic convergence; Financial deepening; Panel data econometrics; WAEMU sub-region; Principal component analysis;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F15 - International Economics - - Trade - - - Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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