Lucien R. Momeka^1,, Pacifique K. Murhula², Henry N. Muganza², Banza E. Iyoto¹, Victoire M. Atosha¹

The purpose of this paper is to analyze the environment in which monetary policy in Democratic Republic of Congo (DRC) is driven in order to appreciate its possible efficiency and to identify main constraints that hinder its efficiency thereafter. To achieve this goal, we mobilized a vector error correction model (VECM) using monthly Congolese data from January 2002 to December 2018. The results of the evaluation show that the monetary policy of the “Central Bank of Congo” (CBC) endures a weak efficiency because of the absence of the links existing between its policy tool (nominal interest rate) and the objective of the monetary authority (inflation). On the other hand, the survey concludes that the high level of dollarization, the exchange rate (regime), the undeveloped financial system, budgetary or fiscal dominance and external debt constitute main constraints that weigh on the conduct of the monetary policy of the CBC altogether. It being, measures of complete dedollarization or “De jure dollarization”, an optimal exchange rate régime, a financial system development, an orderliness budgetary focused on rules and debt sustainability prove to be necessary to orient actions of the monetary authority in order to reach the efficiency of its policy.

constraints, efficiency, monetary policy, central bank, vector error correction model