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Dimensional and dynamic effects of common currency on trade: The case of the African Franc Zone

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  • Dieudonné Mignamissi
  • Mbouandi Njikam Mouhamed

Abstract

This paper estimates the dimensional and dynamic trade effects of monetary integration in the African Franc Zone. We consider the 14 CAEMC and WEAMU countries and their bilateral trading partners over the period 1995–2019. On the basis of an augmented gravity model, the results show the existence of heterogeneous effects, the first being dimensional and the second time-related. In other words, while monetary integration has a positive and significant average effect, a refined analysis shows that not only have some countries experienced losses and others gains, but also, the time-related effects have not been uniform. However, when considering the Franc Zone as a consolidated entity, absolute trade losses disappear. Finally, the application of a non-parametric approach reveals the existence of economies of scale for low trade intensities. Based on these results, we propose a set of policies conducive to the implementation of resilience mechanisms in the event of exogenous shocks and to an ambitious reform of the monetary structure of the Franc Zone as a whole.

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  • Dieudonné Mignamissi & Mbouandi Njikam Mouhamed, 2022. "Dimensional and dynamic effects of common currency on trade: The case of the African Franc Zone," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 31(8), pages 1243-1280, November.
    • Handle: RePEc:taf:jitecd:v:31:y:2022:i:8:p:1243-1280
    DOI: 10.1080/09638199.2022.2063927
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