Money Demand and Regional Monetary Policy in the West African Economic and Monetary Union

Philipp Rother

No 1998/057, IMF Working Papers from International Monetary Fund

Abstract: Regional monetary integration, financial liberalization, and the adoption of indirect policy instruments have changed the conditions for monetary policy in the West African Economic and Monetary Union (WAEMU). The stability of money demand has become a crucial element for monetary policy. This paper presents empirical money demand estimations for regional monetary aggregates and analyzes their stability and forecast performance. The estimations result in a stable relationship for narrow money (M1). Consequently, the region’;s central bank, the BCEAO, can continue to conduct monetary policy in line with the fixed exchange rate system if it succeeds in maintaining financial stability.

Keywords: WP; interest rate; money demand; credit; money demand function; regional money demand; CFA franc zone; WAEMU; BCEAO; CFA franc; narrow money; money demand equation; money demand specification; Chow test; interest rate difference; money demand estimation; Demand for money; Exchange rate adjustments; Currencies; Inflation; Personal income; West Africa (search for similar items in EconPapers)
Pages: 25
Date: 1998-04-01
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1998/057

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