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Competitiveness and growth within the CFA franc zone: Does the switch to the Euro matter?

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  • Issiaka Coulibaly

Abstract

In this paper, we seek to analyze the impacts exerted by the substitution of the French franc for the euro on real and nominal effective exchange rates, competitiveness and growth within the CFA zone. Our findings show that, since the advent of the euro, the evolution of the real exchange rates and the competitiveness (measured by currency misalignments) have become increasingly dependent on nominal exchange rate movements and therefore on the evolution of the anchor currency. While the appreciation of the euro in the last decade did not translate into strong and generalized currency overvaluations—except in Central African Republic, Benin and Equatorial Guinea—it had however strongly reduced the extent of real undervaluations induced by the 1994 devaluation of the CFA franc. This has resulted in an increasingly negative effect exerted by real and nominal appreciations on growth rates of these countries since the switch to the euro.

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  • Issiaka Coulibaly, 2014. "Competitiveness and growth within the CFA franc zone: Does the switch to the Euro matter?," International Economics, CEPII research center, issue 139, pages 1-18.
    • Handle: RePEc:cii:cepiie:2014-q3-139-1
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    Cited by:

    1. Lampe, Florian, 2022. "Interest Rate Policy of the Banque Centrale des Etats de l'Afrique de l'Ouest: International Currency Hierarchy, Monetary Base Coverage, and Bank Lending in the WAEMU," ZÖSS-Discussion Papers 76, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS), revised 2022.
    2. Dieudonné Mignamissi, 2021. "Coûts/gains commerciaux de l'intégration monétaire dans la Zone Franc africaine: Une analyse à partir de 5 scenarii," African Development Review, African Development Bank, vol. 33(1), pages 180-192, March.

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    More about this item

    Keywords

    Anchor currency; CFA zone; Competitiveness; Growth;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • F01 - International Economics - - General - - - Global Outlook
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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