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Is the Franc Zone an Optimal Currency Area?

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posted on 2009-03-24, 15:39 authored by David Fielding, Kalvinder K. Shields
In this paper we modify the method of Blanchard and Quah (1989) in order to estimate a structural VAR model appropriate for a small open economy. In this way we identify shocks to output and prices in the members of the two monetary unions that make up the African CFA Franc Zone. The costs of monetary union membership will depend on the extent to which price and output shocks are correlated across countries, and the degree of similarity in the long run effects of the shocks on the macro-economy. The policy conclusions depend on the relative importance of different macroeconomic variables to policymakers, and the speed with which a policymaker is able to respond to a shock.

History

Publisher

Dept. of Economics, University of Leicester.

Available date

2009-03-24

Publisher version

http://www.le.ac.uk/economics/research/discussion/papers2000.html

Book series

Papers in Economics;00/1

Language

en

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