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The CFA Franc zones and the theory of Optimum Currency Area

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  • François J. Gurtner

Abstract

Summary: This article aims at applying the theory of Optimum Currency Area to the African CFA Franc zones. Its main purpose is to analyse whether one of the two CFA Franc zones - the West African Economic and Monetary Union on the one hand, and the Economic and Monetary Community of Central Africa on the other hand - form an area which is more optimal than the other from a monetary point of view. The classical criteria of the Optimum Currency Area are discussed to arrive at the conclusion. The main finding of this article is that neither of the two zones can be clearly considered more optimal than the other, although the western CFA Franc zone seems to fulfil some of the required criteria more efficiently. In both cases, the degree of heterogeneity of production remains very high and the export base very narrow. In addition, it is difficult to distinguish the degree of labour mobility of both zones. Finally, intra-zone trade is shown to be very low, without any prospect of change in the near future.

Suggested Citation

  • François J. Gurtner, 1999. "The CFA Franc zones and the theory of Optimum Currency Area," Africa Spectrum, Institute of African Affairs, GIGA German Institute of Global and Area Studies, Hamburg, vol. 34(1), pages 33-57.
    • Handle: RePEc:gig:afjour:v:34:y:1999:i:1:p:33-57
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