Advanced Search
MyIDEAS: Login to save this paper or follow this series

Determinants of inflation among franc zone countries in Africa


Author Info

  • Boccara, Bruno
  • Devarajan, Shantayanan
Registered author(s):


    Despite belonging to a monetary union with a common currency and pooled foreign reserves, the countries of Africa's franc zone (CFA) experience substantially different inflation rates, especially in the short run. The authors develop a model of inflation differentials for the franc zone countries based on behavioral differences in fiscal policy responses to fluctuations in the price of the main export commodity. The model is basedon the fact that for primary exporters in general, and for CFA zone members in particular, the volatility of commodity prices implies a high variance in government revenues. The model identifies two effects: a monetary effect (commodity booms imply a surge in foreign reserves which, if unsterilized, is inflationary) and a fiscal effect (higher government revenues are, to varying degrees, accompanied by a marked increase in the level of spending, which is again inflationary). The fiscal relationship is the key behavioral equation of the model, as the other relationships are essentially derived from accounting identities. The authors empirically test the model for Cote d'Ivoire. It tracks quite well the inflationary cycle that Cote d'Ivoire experienced after the boom in coffee prices in 1975-76. Since the countries are in a monetary union, if some countries have expansionary fiscal policy (and thus inflation) the others must take a more contractionary fiscal stance. One issue for future research is what determines whether a member country has the freedom to follow an expansionary fiscal policy or whether it must contract because other members have already expanded. A discussion of potential games played by countries in a monetary union may shed light on these issues.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL:
    Download Restriction: no

    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1197.

    as in new window
    Date of creation: 30 Sep 1993
    Date of revision:
    Handle: RePEc:wbk:wbrwps:1197

    Contact details of provider:
    Postal: 1818 H Street, N.W., Washington, DC 20433
    Phone: (202) 477-1234
    Web page:
    More information through EDIRC

    Related research

    Keywords: Economic Stabilization; Economic Theory&Research; Environmental Economics&Policies; Markets and Market Access; Access to Markets;


    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Devarajan, Shantayanan & de Melo, Jaime, 1987. "Adjustment with a Fixed Exchange Rate: Cameroon, Cote d'Ivoire, and Senegal," World Bank Economic Review, World Bank Group, World Bank Group, vol. 1(3), pages 447-87, May.
    2. Cuddington, John, 1988. "Fiscal policy in commodity-exporting LDCs," Policy Research Working Paper Series 33, The World Bank.
    3. Honohan, Patrick, 1992. "Price and monetary convergence in currency unions: The franc and rand zones," Journal of International Money and Finance, Elsevier, Elsevier, vol. 11(4), pages 397-410, August.
    4. Devarajan, Shantayanan & de Melo, Jaime, 1990. "Membership in the CFA zone : Odyssean journey or Trojan horse?," Policy Research Working Paper Series 482, The World Bank.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Fielding, David & Shields, Kalvinder, 2001. "Modelling macroeconomic shocks in the CFA Franc Zone," Journal of Development Economics, Elsevier, Elsevier, vol. 66(1), pages 199-223, October.


    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


    Access and download statistics


    When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1197. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.