Effectiveness of the BCEAO's monetary policy in financing the economy in Benin

Abstract

The present study aims to analyze the effectiveness of monetary policy in financing the economy in Benin. Taking part in the theoretical controversy between Keynesian and monetarist on the effectiveness of monetary policy, this study tests empirically the effectiveness of the crowding-out effect the government could exert on the private sector. To do this, econometric tests were carried out on data covering the period 1980 - 2020. The variables used in this study are: Gross Domestic Product (GDP) as an endogenous variable; credits to the economy and to the government, broad money, reserve requirements and exports as exogenous variables. The results from the error correction model (ECM) estimation that the increase in the money supply leads to an increase in both credits to the economy and to the government. Credit to the economy has a positive and significant influence on production while credit to the government negatively and significantly affects economic growth. Finally, in the long term, the broad money supply has no significant influence on economic growth. Likewise, the reserve requirements do not have significant effects both in the short and long term.

key words: money supply, credit to the economy, credit to the government, economic growth

Code JE: E52, E31, E61, E42,  E58

Type de papier: recherche empirique