Credibility of Monetary Policy in a Currency Area: The Case for the Franc Area
JOURNAL ARTICLE
Cite JOURNAL ARTICLE
Style
Format
Credibility of Monetary Policy in a Currency Area: The Case for the Franc Area
Credit and Capital Markets – Kredit und Kapital, Vol. 23 (1990), Iss. 3 : pp. 389–409
Additional Information
Article Details
Author Details
Samuel Ngogang, Yaoundé/Kamerun
References
-
Alesina, Alberto / Tabellini, Guido (1988): "Credibility and Politics", European Economic Review 32, pp. 542 - 50.
Google Scholar -
Barro, Robert J. (1986a): "Recent Development in the Theory of Rules versus Discretion", The Economic Journal supplement, vol. 96, pp. 23 - 37.
Google Scholar -
Barro, Robert J. (1986b): "Reputation in a Model of Monetary Policy with Incomplete Information", Journal of Monetary Economics 17, pp. 3 - 20.
Google Scholar -
Barro, Robert J. / Gordon, David B. (1983): "Rules, Discretion and Reputation in a Model of Monetary Policy", Journal of Monetary Economics 12, pp. 101 - 21.
Google Scholar -
BEAC (1983): "Xe anniversaire 1973 - 1983 (la BEAC a 10 ans) Yaounde.
Google Scholar -
BEAC (1988): "Dispositions organiques", Yaounde.
Google Scholar -
Begg, David K. H. (1983): "The Rational Expectations Revolution in Macroeconomics: Theories and Evidence, Oxford.
Google Scholar -
Black, Fisher (1970): "Banking and Interest Rates in a World Without Money", Journal of Bank Research, 1, pp. 9-20.
Google Scholar -
Alesina, Alberto / Tabellini, Guido (1988): "Credibility and Politics", European Economic Review 32, pp. 542 – 50.
Google Scholar -
Barro, Robert J. (1986a): "Recent Development in the Theory of Rules versus Discretion", The Economic Journal supplement, vol. 96, pp. 23 – 37.
Google Scholar -
Barro, Robert J. (1986b): "Reputation in a Model of Monetary Policy with Incomplete Information", Journal of Monetary Economics 17, pp. 3 – 20.
Google Scholar -
Barro, Robert J. / Gordon, David B. (1983): "Rules, Discretion and Reputation in a Model of Monetary Policy", Journal of Monetary Economics 12, pp. 101 – 21.
Google Scholar -
BEAC (1983): "Xe anniversaire 1973 – 1983 (la BEAC a 10 ans) Yaounde.
Google Scholar -
BEAC (1988): "Dispositions organiques", Yaounde.
Google Scholar -
Begg, David K. H. (1983): "The Rational Expectations Revolution in Macroeconomics: Theories and Evidence, Oxford.
Google Scholar -
Black, Fisher (1970): "Banking and Interest Rates in a World Without Money", Journal of Bank Research, 1, pp. 9-20.
Google Scholar
Abstract
Credibility of Monetary Policy in a Currency Area: The Case for the Franc Area
In this paper the mechanisms of the Franc area and the actual implementation of monetary policy in the so-called BEAC-Zone have been described.
With respect to the existing agreements between France and the CFA-countries as well as to the underling credibility analysis it has be shown that the African monetary unions cannot pursuit a 'credible' monetary policy insofar as the Franc area is in fact a monetary payments system as well as an accounting system of exchange. The agreements didn't take these features into consideration so that the actual policymaking can only be time-inconsistent, not credible.
A credible policy in these countries calls for a clear definition of what is meant by convertibility. Based on theoretical considerations a practical definition has been proposed in this paper, and an optimal convertibility rate has been determined following the so-called "social welfare approach" to the credibility problem, as opposed to the so-called "political approach" [see Cukierman (1985); Cukierman / Meltzer (1986)].
The proposed setup clearly shows the shortcomings of the current structure and functioning of the Franc area and calls for further analyses in the perspective of the European Common Market of 1993 where capital movements will be free.