Monetary Policy with Heterogeneous Agents in Developing Countries : The Case of CEMAC zone

This paper quantitatively assesses the role of farm households heterogeneity in the conduct of monetary policy in developing countries such as CEMAC zone. Using Bayesian estimation techniques via the SSJ (Sequence Space Jacobian) method, we estimate two models, one with heterogeneity of non- farm households (HANK without farmer model) and one with heterogeneity of farm and non- farm households (HANK with farmer model). We find that taking into account the heterogeneity of farm households in the conduct of monetary policy plays an important role in mitigating the transmission of asymmetric shocks. The models also reveal that farm households have an important role to play in the growth process, provided they are supported by monetary and fiscal authorities.