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Monetary Union and Bilateral Intra Zone Trade Impact: Structural VAR Approach in CFA Zone

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  • Dramani, Latif A. Guy
  • Laye, Oumy

Abstract

In this article we empirically try to answer the second hypothesis on the theory of the ZMO developed by Mc Kinnon (1963), while working on a sample of the countries of the zone franc. We found on the assets of the gravity models to put in evidence the existing monetary union impact on the bilateral trade flux. In order to measure the effects of the monetary union on the trade intra zone we call on a model structural VAR, to which is associated the method of space state model assessment with the aim of distinguishing the impact of an economic policy shock in a group of country in open economy. Our sample is constituted in this particular case of the 12 countries of the zone franc; seven countries of the UEMOA zone and five countries of the CEMAC zone. The originality of the approach is based on the fact that we tempt an endogeneisation of the flux of bilateral trade of every country in this analysis. The results of our investigations show a sensitive reduction of the effects borders, an improvement of the institutional effects as well as the effects bound to the distance on the flux of trade intra zone. On the other hand, the survey by structural VAR and state measure models shows a relative symmetry of shocks observed to in the real shocks of demand while the shocks of price and supply rather present an asymmetric character. With the importance of the real demand shocks, in our survey we globally notice that some efforts must be made to vary the structure of the economy of zone franc countries currently based on the agroalimentary industries, which are very sensitive to the climatic risks; in order to hope to have the sustained growth rates which will allow to reach the objectives of poverty reduction by 2015.

Suggested Citation

  • Dramani, Latif A. Guy & Laye, Oumy, 2006. "Monetary Union and Bilateral Intra Zone Trade Impact: Structural VAR Approach in CFA Zone," Conference papers 331470, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
  • Handle: RePEc:ags:pugtwp:331470
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    File URL: https://ageconsearch.umn.edu/record/331470/files/2189.pdf
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    References listed on IDEAS

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    1. Lord, Ron, 1995. "Sugar: Background for 1995 Farm Legislation," Agricultural Economic Reports 262017, United States Department of Agriculture, Economic Research Service.
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