Stress Testing the Foreign Exchange Reserves Dynamics in CEMAC

Stress tests sur la dynamique des réserves de change de la CEMAC

Fabien Clive Ntonga Efoua () and Etienne Inédit Blaise Tsomb Tsomb
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Fabien Clive Ntonga Efoua: FSEG - Faculté de Sciences Econonomiques et de Gestion - Yaoundé II - Université de Yaoundé II
Etienne Inédit Blaise Tsomb Tsomb: Université de Douala

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Abstract: This is a quasi-seminal paper on the stress tests theme in the BEAC issuing area (apart from those regularly carried out by the International Monetary Fund). It is an extension of the analyses proposed by Bekolo Ebe (2001) then Ntonga Efoua (2019). Its objective is to assess the resilience of the foreign exchange reserves dynamic of the CEMAC countries (apprehended by the ECR - External Coverage Rate of the currency) in the face of an adverse and hypothetical scenario, by using a panel data model. The stress scenario is based on the financial history main events of the subregion; namely: (i) the crisis of the 1980s, (ii) the financial turmoil of 2015-2017 and (iii) the economic crisis resulting from the Covid 19 pandemic. Our main result is that the ECR can successfully pass a stress test which it would have probably failed during the 1980-90s. Precisely, the level of the ECR under our stress scenario would be the lowest of the post-devaluation period. Slightly above the critical minimum statutory of 20%, this level (21.57%) is however by far, higher than the 14.8% that the ECR reached during the financial panic whose the peak was the devaluation of the CFA Franc. On this basis, we draw some lessons and formulate economic policy recommendations.

Keywords: Stress tests; stress scenario; financial panic of the 1980s; ECR; CEMAC; BEAC; panel data; scénarios de stress; panique financière des années 1980; TCE; données de panel (search for similar items in EconPapers)
Date: 2023-06
Note: View the original document on HAL open archive server: https://hal.science/hal-04105577v1
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Published in Les Cahiers du CEDIMES, 2023, 18 (2), pp.132-160

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