Search Results (4)

Motivated by the coexistence of retail and wholesale banks with distinct risk profiles under uniform capital regulation, and by the lack of quantitative evidence on whether differentiated capital requirements can reduce bank runs and interbank frictions in low-income monetary unions, this paper aims to determine a capital ratio for retail banks that can reduce the likelihood of bank runs in the WAEMU area. The study also compares the impact of imposing capital requirements on retail banks versus implementing the same level of regulation for wholesale banks. The key findings are as follows: A capital ratio of 10 percent for retail banks is found to be sufficient to reduce the probability of bank runs and mitigate interbank market frictions in the WAEMU area. Similarly, applying the same requirements to wholesale banks also reduces the likelihood of bank runs. Implementing capital requirements on retail banks does not significantly affect interbank lending costs, whereas imposing the same requirements on wholesale banks leads to an increase in these costs. Consequently, regulating retail banks tends to shift assets towards wholesale banks, while regulating wholesale banks reallocates assets towards retail banks. The calculated capital ratio of 10 percent for retail banks maximizes welfare, surpassing the welfare achieved when the same requirements are imposed on wholesale banks. Therefore, the same capital ratio offers greater stability benefits for retail banks than wholesale banks, highlighting the mismatch between uniform capital regulations and heterogeneous banking models. Full article

A data envelopment analysis (DEA) has yet to be chosen to assess countries’ financial inclusion levels. We introduce an application of the DEA methodology to compute aggregate performance measures regarding the financial inclusion of economies. We specifically explore composite scores based on relative efficiency, super-efficiency, and cross-efficiency approaches. We implement the proposed procedure to study the financial inclusion in nations from the West African Economic and Monetary Union (WAEMU). We use the Union’s Central Bank’s financial inclusion data from 2010 to 2017. We obtain robust financial inclusion level measures, showing that overall, in the Union, there have been steady improvements during the study period, but with heterogenous behavior at the level of each economy. A benchmarking analysis allowed us to determine the countries with the best practices. For the remaining nations, we find their reference countries. Finally, we identified which financial service sectors drive the financial inclusion in each country from the optimal weights of the DEA model. Full article

This paper analyzes and characterizes the nature of the interactions between countries of the West African Economic and Monetary Union (WAEMU) over the period 1995–2015. The analysis uses sigma-convergence on the one hand and the Dendrinos-Sonis spatial competition model estimated by the SUR method on the other hand. The results show a lack of convergence of living standards and support the idea of income polarization in space; these results also support the idea of a very poorly integrated region with relatively competitive interrelationships. The paper suggests the acceleration of regional integration in the WAEMU region combined with the implementation of inclusive integration policies that promote each member’s comparative advantage. Full article

This study used panel data covering 27 years to investigate the causality between regional stock exchange development and economic growth in the West African Economic and Monetary Union (WAEMU) countries. We performed a homogeneous Granger non-causality with an autoregressive distributed lag model (ARDL) and Markov-switching analysis, using six indicators for the stock and financial market and six for control. The results showed a close economic relationship between WAEMU countries and causality from the regional stock exchange, which supports the supply leading hypothesis. The causality was confirmed in the short and long run, depending on the variable. The causal relationships that support the demand-driven hypothesis were recorded from the economic growth for four market measurements. Full article