Structural dynamics of the money supply in Benin from 2001 to 2012

This study found that the main component of the money supply before 2003 was banknotes in circulation. From 2003 to 2012, demand and term deposits are the main components of the money stock. An econometric analysis, through an error correction model, revealed that all the variables, namely, the monetary supply, the monetary base, the credits to the economy, net foreign assets and the interest rate are integrated of the order 1 and the residuals of the order 0. Therefore, there is a co-integrating relationship between them. Monthly data over the period 2001-2012 were used. They came from BCEAO (monthly newsletters, integrated monetary statistics, etc.). The results revealed that all the variables are significant in the short and long run, except the interest rate (0.03% in long run and -0.04% in short run). Thus, as Adjovi (2010) stated, the commercial banks are increasingly brought to ignore signals from the central bank. Even if the central bank cuts interest rates, the primary banks do not decrease their base rate. In WAEMU countries, in general, and in Benin in particular, the transmission of monetary policy to the real sphere, is lacking.