Land Collateral and Rule-of-Thumb Households in a Franc Zone Country: A Bayesian Appraisal

NANA DAVIES, Charles (2020): Land Collateral and Rule-of-Thumb Households in a Franc Zone Country: A Bayesian Appraisal.

Abstract

We model the supply side of the banking sector, two types of households, and a land asset collateral in a small open economy model that accounts for some of the most enduring features and provisions of the Franc Zone. The model is estimated using the Metropolis-Hasting algorithm and Cameroon's annual data from 1979 to 2016. Four findings stand out. First, sensible posteriors of some deep parameters are obtained when the proportion of rule-of-thumb households is set to forty-eight percent. Second, permanent technology, bank profit, consumption, and foreign inflation shocks are the main drivers of macroeconomic fluctuations. Third, among those shocks, only a bank profit shock, which is associated with a sharp drop of wholesale interest rates, leads to an output expansion. Fourth, fiscal policy matters but through its effects on banks' balance sheet.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cameroon - Franc Zone - Land Collateral - Metropolis-Hasting - Rule-of-Thumb households
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F45 - Macroeconomic Issues of Monetary Unions

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