TITLE:
Is an African Monetary Union Project for the CAEMC Countries Possible?
AUTHORS:
Léon Mayéko
KEYWORDS:
African Common Currency, Foreign Exchange Reserves, Structural Transformation, Credibility of the Exchange Rate Regime, Institutional Governance
JOURNAL NAME:
Modern Economy,
Vol.14 No.12,
December
29,
2023
ABSTRACT: The aim of this research is to verify whether
it is possible for the African countries of CAEMC to form a solidly established
monetary zone. Our approach is based on the work of Gosselin and Parent (2012), in order to measure the capacity to mobilize the foreign exchange
reserves needed to protect against
speculative attacks. The results show that in the short term, when GDP, money
supply as a percentage of GDP, exports of goods and services and imports of goods and services as a percentage
of GDP increase by 10%, total foreign exchange reserves rise by 45.2%,
9.1%, 4.1% and 16.3% respectively for Congo,
and by 37.8%, 35.0%, 7.5% and 18.9% for Gabon. In the long term, total foreign
exchange reserves increased by 2.8%, 22.0%, 18.4% and 8.7% respectively for
Congo. However, for Gabon, when GDP and imports of goods and services as a
percentage of GDP increase by 10%, total reserves fall by 3.7% and 12.1%, but
rise by 25.7% and 20.5% when money supply as a percentage of GDP and
exports of goods and services increase by 10%.