Monetary policy and macroeconomic stability in the Central African Economic and Monetary Community
DOI:
https://doi.org/10.18559/rielf.2024.1.1636Keywords:
monetary policy, macroeconomic stability, economic growthAbstract
Purpose: This article aims to show that macroeconomic stability is ensured by monetary policy in the Central African Economic and Monetary Community.
Design/methodology/approach: The theoretical framework is part of the new Keynesian school. Empirically, the structural VAR model is used over the period 1980-2019.
Findings: macroeconomic stability is ensured by monetary policy in most CEMAC countries. Demand shocks negatively impact GDP in Cameroon, CAR, Congo, Chad and Gabon. On the other hand, they have a positive impact on Equatorial Guinea. Supply shocks positively influence CAR, Congo, Chad, Gabon and Equatorial Guinea; while in Cameroon these have a negative effect. However, monetary policy shocks have a very significant impact in Cameroon, CAR, Gabon, Equatorial Guinea and less significant in Congo and Chad. For their part, financial shocks have a positive influence on Congo and Chad; while in Cameroon, CAR and Gabon these shocks have a negative influence. Liquidity shocks have a negative impact in Congo and Chad; but in Cameroon, CAR, Gabon and Guinea positive effects are recorded. Our results confirm the importance of a strict monetary policy as a useful instrument for stabilizing the economy.
Originality/value: Its originality, compared to the existing literature, lies in its methodological approach and in the contextualization of the theory of the new Keynesian economy in the case of a monetary union whose level of activity is dependent on oil.
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