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Ngogang, S. Credibility of Monetary Policy in a Currency Area: The Case for the Franc Area. Credit and Capital Markets – Kredit und Kapital, 23(3), 389-409. https://doi.org/10.3790/ccm.23.3.389
Ngogang, Samuel "Credibility of Monetary Policy in a Currency Area: The Case for the Franc Area" Credit and Capital Markets – Kredit und Kapital 23.3, 1990, 389-409. https://doi.org/10.3790/ccm.23.3.389
Ngogang, Samuel (1990): Credibility of Monetary Policy in a Currency Area: The Case for the Franc Area, in: Credit and Capital Markets – Kredit und Kapital, vol. 23, iss. 3, 389-409, [online] https://doi.org/10.3790/ccm.23.3.389

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Credibility of Monetary Policy in a Currency Area: The Case for the Franc Area

Ngogang, Samuel

Credit and Capital Markets – Kredit und Kapital, Vol. 23 (1990), Iss. 3 : pp. 389–409

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Samuel Ngogang, Yaoundé/Kamerun

References

  1. Alesina, Alberto / Tabellini, Guido (1988): "Credibility and Politics", European Economic Review 32, pp. 542 - 50.  Google Scholar
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  9. Alesina, Alberto / Tabellini, Guido (1988): "Credibility and Politics", European Economic Review 32, pp. 542 – 50.  Google Scholar
  10. Barro, Robert J. (1986a): "Recent Development in the Theory of Rules versus Discretion", The Economic Journal supplement, vol. 96, pp. 23 – 37.  Google Scholar
  11. Barro, Robert J. (1986b): "Reputation in a Model of Monetary Policy with Incomplete Information", Journal of Monetary Economics 17, pp. 3 – 20.  Google Scholar
  12. 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
  13. BEAC (1983): "Xe anniversaire 1973 – 1983 (la BEAC a 10 ans) Yaounde.  Google Scholar
  14. BEAC (1988): "Dispositions organiques", Yaounde.  Google Scholar
  15. Begg, David K. H. (1983): "The Rational Expectations Revolution in Macroeconomics: Theories and Evidence, Oxford.  Google Scholar
  16. 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.