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N° 2009-07 |
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| April 2009 |
| Term of Trade Shocks in a Monetary Union: an Application to West-Africa |
Loïc Batté
Agnès Bénassy-Quéré
Benjamin Carton
Gilles Dufrénot |
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| We propose a two-country DSGE model of the Dutch disease in a monetary union, calibrated on Nigeria
and WAEMU. Three monetary regimes are successively studied at the union level: a flexible exchange
rate with constant money supply, a flexible exchange rate with an accommodating monetary policy, and a
fixed exchange rate regime. We find that, in the face of oil shocks, the most stabilizing regime for Nigeria
is a fixed money supply whereas it is a fixed exchange rate for WAEMU. However, the introduction of
an oil stabilization fund can reduce the disagreement on the common policy rule. Furthermore, the two
zones may agree on a fixed money-supply rule in the face of both oil and agricultural price shocks. |
Non-technical summary  |
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Résumé
non-technique
en français |
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| Full text |
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| Dutch disease; DSGE; monetary union; optimal monetary policy |
Keywords |
| E52; F41; Q33 |
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