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Financial Deepening Dynamics and Implication for Financial Policy Coordination in a Monetary Union: the case of WAEMU

Christian Nguena () and Tsafack Nanfosso Roger ()
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Tsafack Nanfosso Roger: Econimic Policy Management Program

No 13_005, AAYE Policy Research Working Paper Series from Association of African Young Economists

Abstract: This article aims to investigate the implication of financial deepening dynamics for financial policy coordination in the WAEMU sub-region. For this purpose we adopted a hypothetical-deductive theoretical approach and an empirical investigation in bothstatic and dynamic panel data econometrics that has allowed us to identify some stylized facts on this issue and have led to the following global recommendations based on our empirical investigation: The converging dynamics is evident in the sub-region and implies that after five years, financial policies harmonization would have an optimal impact; This highlights the feasibility of common effectiveness monetary policy targeting indirectly financial depth in the sub-region; However member states should work within five years towards harmonizing cross-country differences in structural and institutional characteristics that hamper the effectiveness of financial policies. Especially they should implement a financial policy whose mainly aim to increase the level of savings rate, GDP per capita growth rate and density and reduce the level of reserves in the sub-region.

Keywords: Economic convergence; Financial deepening; Panel data econometrics; WAEMU sub-region; Principal component analysis (search for similar items in EconPapers)
JEL-codes: E44 F15 F42 F36 G10 O16 O50 P52 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2013-07, Revised 2013-11
New Economics Papers: this item is included in nep-mac
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