TITLE:
Monetary Policy Regulation for the Bank of Central African States (BEAC)
AUTHORS:
Antoine Ngakosso
KEYWORDS:
Exchange Rate, Balance, BEAC Bank, Gap, Reaction Function
JOURNAL NAME:
Modern Economy,
Vol.8 No.9,
September
13,
2017
ABSTRACT: This paper aims to put forward a reaction function
concerning the behaviour of the Bank of the Central African States (BEAC)
turned toward the future then increasing the exchange rate to ensure the
internal and external balance in the countries of this monetary zone. Based on
the CFA currency and US dollar equivalence, it comes out that there is a strong
non linearity between the interest rate and the exchange rate gap. The optimal
gap level of the exchange rate in long term (short term) beneath which the
monetary authorities should try to reduce the nominal interest rate is 277 F
CFA (260 F CFA) and beyond which they will increase to maintain internal and
external balance of the economy of the countries in this zone. So, the exchange
rate should be taken as a target whose drift should govern the adjustment of
the monetary policy instruments notably the interest rate.