CFAF misalignments and trade volume in the CEMAC zone

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This book aims to address the ongoing concern of whether the CFAF of CEMAC countries is overvalued or undervalued, and to show the effects of REER misalignments on trade performance in the CEMAC zone by identifying its transmission channels. To this end, the misalignments are first calculated from the REER estimate, WB and CEPII data over the period 2000-2017. The explanatory model of the trade volume of the area is estimated using the panel double MC technique over the same period. The results reveal that these misalignments contribute to the increase in the volume of exports of these countries. These effects would be due to the magnitude and persistence of the current overvaluation of the CFAF and the price inelasticity of demand for exports in the mining and oil sectors. However, the volume of exports is not at its optimal level. It is therefore advisable to implement a monetary policy that reduces the high dependence on the euro, which amplifies the overvaluation of the CFAF and therefore minimizes the volume of exports.