Open AccessAsymmetric Shocks Patterns in the Central African Economic and Monetary Community
Author(s) -
Hao Ouyang,
Laetitia P. Sokeng Dongfack
Publication year - 2020
Publication title -
journal of economics and public finance
Language(s) - English
Resource type - Journals
eISSN - 2377-1046
pISSN - 2377-1038
DOI - 10.22158/jepf.v6n2p56
Subject(s) - economics , currency , context (archaeology) , currency union , supply shock , optimum currency area , aggregate demand , monetary policy , monetary economics , economic and monetary union , demand shock , macroeconomics , international economics , european union , paleontology , biology
Assessing the economic efficiency of countries’ participation to a currency union has become a relevant topic since the introduction of the Optimum Currency Area (OCA) theory by Mundell (1961). This paper attempts to evaluate the performance of the Central African Economic and Monetary Community (CAEMC) as a currency union in the context of exposure to asymmetric shocks. We first identify structural macroeconomic shocks within the region using the Blanchard and Quah Method. We find that aggregate demand shocks fluctuations display more symmetric patterns than those of aggregate supply shocks. Chad is the apparent outlier, as it is the only economy in the monetary union to experience negative supply shocks. This suggests that the loss of monetary sovereignty might result in significant adjustment costs.