External Dependence of the African Franc CFA zone. Empirical Investigations on Money Supply Process
The objective of this paper is to study the operating mechanisms of the issuing institutions in CFA area and the different sources of money creation. Our approach consists in studying, respectively the automatic or discretionary nature of monetary policies, through the establishment of nonneutralization/non-sterilization monetary indices (index); and in a second step we test, using co-integration models, the evolution of monetary base in relation of Net External Asset (NFA) and in relation to the evolution of Net Domestic Assets. Our results mainly indicate the existence of a preponderance of the external sector or NFA over the evolution of the monetary base or money supply, compared to the domestic sector. In addition, we observe an automatic adjustment in both WAEMU and CEMAC over the long term. But the return to equilibrium is slower in WAEMU due to a mix of automation and discretion. On the other hand, in CEMAC, the return to equilibrium is almost automatic with a strong dependence on the external sector.