Endogenous Optimal Currency Areas: The Case of the Central African Economic and Monetary Community

The Central African Economic and Monetary Community (CAEMC) has been a monetary union for several decades now. According to the hypothesis of endogenous optimal currency areas (OCAs), the degree of business cycle synchronisation across its member states should be significantly higher today than forty years ago. This paper examines cycle synchronisation along three different statistical dimensions and shows that (i) synchronisation has remained low throughout the period 1960–2007, but (ii) it has marginally increased over time. These findings have important implications for the design of the economic integration process in Africa. A chronology of business cycles in CAEMC countries is provided.