THE PURPOSE OF THIS PAPER is to examine the changes in money supply during the period 1962–68 in the seven African countries (Dahomey, Ivory Coast, Mauritania, Niger, Senegal, Togo, and Upper Volta) that have a common central bank, the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), with a view to determining the relative importance of the various factors causing such changes. For this purpose, the causal factors are divided into “behavioral” and “nonbehavioral.” The former are identified as (1) the ratio (c) of currency to money and (2) the ratio (r) of cash reserves held by the commercial banks to demand deposits. The nonbehavioral factors considered are (1) changes in net foreign assets (Δ F), (2) changes in credit to the government (Δ DG), and (3) policy-induced changes in monetary liabilities (Δ Lp) of the Central Bank. If Δ F and Δ DG are considered autonomous (i.e., outside the control of the Central Bank), then changes in Lp may be properly ascribed to policies of the Central Bank. The relative influence of changes in Lp on money supply (M), compared with that of behavioral and other nonbehavioral factors, should provide an indication of the relative influence of monetary policy on money supply in each of the member countries of the BCEAO as well as in the currency area as a whole.
We present a gravity model that accounts for multilateral resistance, firm heterogeneity and country-selection into trade, while accommodating asymmetries in trade flows. A new equation for the proportion of exporting firms takes a gravity form, such that the extensive margin is also affected by multilateral resistance. We develop Taylor approximated multilateral resistance terms with which to capture the comparative static effects of changes in trade costs. For isolated bilateral changes in trade frictions, multilateral resistance effects are small for most countries. However, if all countries reduce their trade frictions, the impact of multilateral resistance is so strong that bilateral trade falls in most cases, despite the larger trade elasticities implied by firm heterogeneity. As a consequence, the world-wide trade response, though positive, is much lower.