International Reserves Accumulation in Sub‐Saharan Africa: Is the Membership of the Franc Zone an Obstacle?

Motivated by the fact that the abundant existing literature fails to provide a fully satisfactory explanation of the dynamics of international reserves in various developing regions, the present article assesses the role of the currency zone. Specifically, we examine the role of Franc zone on international reserves in a sample of 42 Sub‐Saharan African (SSA) countries, over the period 1990–2018. Based on various panel data methods, we find that the Franc zone is negatively and significantly associated with reserves in SSA countries. This result is robust to the use of alternative measures of reserves as well as to the change in estimation technique. We show that these potential effects are channeled through trade intensity between member countries. Furthermore, the article shows that some heterogeneities, such as institutional quality, the size of the informal sector, climate shocks, economic complexity, economic uncertainty, geopolitical risks, the 1994 devaluation, the launch of the Euro in 1999, and the 2008 financial crisis, may have influenced the role of the Franc zone in reserves accumulation. Taken together, our results suggest reforms aimed at improving the institutional arrangements linking the Franc zone to France, as well as policies to promote structural transformation, aimed at intensifying intra‐zone trade as well as countries' attractiveness.