Abstract

This paper analyzes the impulse response functions due to macroeconomic and financial shocks in the African franc zone. To this end, we rely on the estimation of a vector autoregression (VAR) model for a sample of 14 African countries of the franc zone over the 1994-2014 times. Our results show that the evolution of the combined impulse response functions that a shock of the interest rate has a positive impact on snapshot itself, but negative on the other variables. A shock of the consumer price index has a positive impact on the instantaneous interest rate and the change in GDP per capita. But has a negative impact on the global balance as well as itself. A shock of the global balance has a negative higher instantaneous impact on itself but positive on the other variables. Although the variations observed following this shock on the other variables are quite low. A supply shock in the level of GDP per capita has a negative instantaneous impact on the global balance and itself, but positive on the other variables. Moreover, while this shock causes a slight increase in interest rates over the time, the stationary trend evolutions of the price index and decreasing of the global balance is observed. In terms of recommendations, it appears that the interest rate and the global balance are the two central variables that have captured the attention of the economic policymakers in these countries to improve country’s performance on the pathway of progress.

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