Dynamic risk sharing in the Central African Economic and monetary community

Laetitia P.SOKENG Dongfack () and Hongbing Ouyang ()
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Laetitia P.SOKENG Dongfack: Huazhong University of Science and Technology, School of Economics, China
Hongbing Ouyang: Huazhong University of Science and Technology, School of Economics, China

Journal of Economics and Political Economy, 2020, vol. 7, issue 2, 80-100

Abstract: In contrast to the first Optimum Currency Area (OCA) theory which was mostly about preventing currency areas’ exposure to asymmetric shocks, the second model introduced by Robert A. Mundell (1973) focuses on risk sharing across member states whenfacing adverse macroeconomic shocks. This paper explores how risk is shared across the six member states of the Central African Economic and Monetary Community (CEMAC). Using dynamic panel VAR, we measure disposable income and consumption smoothing of negative output shocks. We find that more than 72 percent of GDP idiosyncratic shocks remain unsmoothed in the case of the Central African currency area from 1986 to 2018

Keywords: Optimal currency area; International risk-sharing; Dynamic panel VAR; Fiscal consolidation; Currency devaluation; Shock smoothing (search for similar items in EconPapers)
JEL-codes: C32 E21 E41 F32 F45 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:cvv:journ1:v:7:y:2020:i:2:p:80-100

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