Exogenous shocks and financial stability in the West African Economic and Monetary Union (WAEMU)

Abstract

The search for financial stability remains a priority in every country today, mainly because of high costs incurred
by financial crises and induced effects of financial stability on economic growth. The economies of the West
African Economic and Monetary Union (WAEMU) countries are characterized by a strong dependence on the
outside, especially with regard to the value of their currency, the CFA franc, and thus the variability of their
exports but also the terms of trade. This study is conducted using an equation of financial instability with panel
data. We used simple moving averages to measure the volatility for the different variables. The results show that
the main predictors of financial instability in the WAEMU are: distributed credit, inflation and the rate of export
growth. The study shows the need for diversification of production in the area and effective supervision of the
banking system to better cope with shocks from internal and external, and financial stability.