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What determines monetary policy in the Franc zone? : estimating a reaction function for the BCEAO

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  • Shortland, Anja
  • Stasavage, David

Abstract

This paper examines to what extent the central bank for the West African Economic and Monetary Union (BCEAO) has used interest rate policy in response to domestic economic developments. We show that while in the long run the BCEAO matches changes in French (Eurozone) interest rates one for one, in the short run it retains freedom to react to domestic economic variables, such as inflation, the output gap, its foreign exchange position and government borrowing.

Suggested Citation

  • Shortland, Anja & Stasavage, David, 2004. "What determines monetary policy in the Franc zone? : estimating a reaction function for the BCEAO," LSE Research Online Documents on Economics 229, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:229
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    File URL: http://eprints.lse.ac.uk/229/
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    References listed on IDEAS

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    1. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
    2. Stasavage, David, 1997. "The CFA Franc Zone and Fiscal Discipline," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(1), pages 132-167, March.
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    Cited by:

    1. Guglielmo Maria Caporale & Abdurrahman Nazif Catik & Mohamad Husam Helmi & Faek Menla Ali & Coskun Akdeniz, 2016. "Monetary Policy Rules in Emerging Countries: Is There an Augmented Nonlinear Taylor Rule?," Discussion Papers of DIW Berlin 1588, DIW Berlin, German Institute for Economic Research.
    2. Wasim Shahid Malik, 2007. "Monetary Policy Objectives in Pakistan : An Empirical Investigation," Macroeconomics Working Papers 22212, East Asian Bureau of Economic Research.
    3. Romain M Veyrune, 2007. "Fixed Exchange Rates and the Autonomy of Monetary Policy; The Franc Zone Case," IMF Working Papers 07/34, International Monetary Fund.
    4. Ghatak, Subrata & Moore, Tomoe, 2008. "Monetary policy rules for transition economies: an empirical analysis," Economics Discussion Papers 2008-5, School of Economics, Kingston University London.
    5. Lee A. Smales, 2013. "The Determinants of RBA Target Rate Decisions: A Choice Modelling Approach," The Economic Record, The Economic Society of Australia, vol. 89(287), pages 556-569, December.
    6. Shesadri Banerjee, 2013. "Inflation Volatility and Activism of Monetary Policy," CEGAP Working Papers 2013_06, Durham University Business School.

    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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