Sectoral Effects of Monetary Policy in CEMAC: Evidence from Bank-level Data

Abstract

Understanding monetary policy tranmission is crucial for macroeconomic analysis, as policy actions can significantly affect interest rates, credit, output and employment by shaping aggregate demand. While standard approaches typically focus on aggregate outcomes, they may overlook important sector-level variations, especially in regions characterized by credit market imperfections and diverse economic structures. In this paper, we investigate the asymmetric impact of monetary policy on the sectoral allocation of bank credit within the Economic and Monetary Community of Central African States (CEMAC), a region where oil dependency and a fixed exchange rate regime add unique policy transmission challenges. Using a Bayesian Structural Vector Autoregression (BSVAR) on bank level monthly data from 2010 to 2019, we show that adjustments in interest rates and liquidity injections produce heterogeneous credit allocation effects across nine key sectors. Our findings highlight asymmetric impact of monetary policy on sectoral allocation of banks credit in CEMAC. Moreover, manufacturing, a capital-intensive sector, is most responsive to liquidity-driven interventions, while agriculture and services exhibit comparatively lower sensitivity. Moreover, liquidity injections consistently exert stronger sectoral influences than interest rate changes, although their magnitude and duration vary markedly. These results persist even when controlling for macroeconomic, institutional and bank sector level factors. From a policy perspective, the pronounced sectoral asymmetries question the efficacy of uniform measures across a region with diverse structural characteristics. By illustrating the disaggregated dynamics of monetary policy shocks, this study questions the market neutrality posture of the Central bank in CEMAC.