Is there scope and need for monetary policy in CEMAC? Because CEMAC is a currency union with a fixed peg to the euro, at first glance the answer would appear to be “no.” However, the persistence of limited de facto capital mobility provides scope for monetary policy actions.1 As to the need, CEMAC is characterized by large real and nominal shocks, stemming for example from changes in the U.S. dollar-euro exchange rate, or from output and terms of trade fluctuations linked to oil production and world oil prices. Thus, there would be a rationale for short-term interventions to avoid potentially large and disruptive swings in consumption.

Common Currency, Uncommon Challenges