IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/54075.html
   My bibliography  Save this paper

Exchange rate regimes and economic performance: Does CFA zone membership benefit their economies?

Author

Listed:
  • Coulibaly, Issiaka
  • Davis, Junior

Abstract

This paper aims to evaluate the importance and impact of CFA zone membership by distinguishing between the effects of being in monetary union from those which arose from anchoring the CFA franc. Using de jure and de facto regime classification schemes and a sample of 35 SSA countries over the 1985-2009 period, our results show that the CFA zone membership has been beneficial in terms of inflation, while it has not resulted in a significant effect on growth. Finally, we evidence that greater fiscal discipline can be associated with peg regimes in SSA, but not necessarily with monetary union.

Suggested Citation

  • Coulibaly, Issiaka & Davis, Junior, 2013. "Exchange rate regimes and economic performance: Does CFA zone membership benefit their economies?," MPRA Paper 54075, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:54075
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/54075/1/MPRA_paper_54075.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 379-408.
    2. Bleaney Michael & Francisco Manuela, 2007. "Exchange Rate Regimes, Inflation and Growth in Developing Countries -- An Assessment," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-20, July.
    3. Andrew K. Rose, 2011. "Exchange Rate Regimes in the Modern Era : Fixed, Floating, and Flaky," Journal of Economic Literature, American Economic Association, vol. 49(3), pages 652-672, September.
    4. Tornell, Aaron & Velasco, Andres, 2000. "Fixed versus flexible exchange rates: Which provides more fiscal discipline?," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 399-436, April.
    5. Eduardo Levy-Yeyati & Federico Sturzenegger, 2003. "To Float or to Fix: Evidence on the Impact of Exchange Rate Regimes on Growth," American Economic Review, American Economic Association, vol. 93(4), pages 1173-1193, September.
    6. Edwards, Sebastian & Levy Yeyati, Eduardo, 2005. "Flexible exchange rates as shock absorbers," European Economic Review, Elsevier, vol. 49(8), pages 2079-2105, November.
    7. Chhibber, Ajay, 1991. "Africa's rising inflation : causes, consequences, and cures," Policy Research Working Paper Series 577, The World Bank.
    8. Marc Klau, 1998. "Exchange rate regimes and inflation and output in Sub-Saharan countries," BIS Working Papers 53, Bank for International Settlements.
    9. Ethan Ilzetzki & Carmen M Reinhart & Kenneth S Rogoff, 2019. "Exchange Arrangements Entering the Twenty-First Century: Which Anchor will Hold?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(2), pages 599-646.
    10. Alexander W. Hoffmaister & Jorge E. Roldós & Peter Wickham, 1998. "Macroeconomic Fluctuations in Sub-Saharan Africa," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 132-160, March.
    11. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    12. David Romer, 1993. "Openness and Inflation: Theory and Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(4), pages 869-903.
    13. Mr. Charalambos G Tsangarides, 2005. "Growth Empirics Under Model Uncertainty: Is Africa Different?," IMF Working Papers 2005/018, International Monetary Fund.
    14. Bleaney, Michael & Fielding, David, 2002. "Exchange rate regimes, inflation and output volatility in developing countries," Journal of Development Economics, Elsevier, vol. 68(1), pages 233-245, June.
    15. André Nyembwe Musungaie, 2010. "L'intégration monétaire en Afrique : particularités et rationalité économique," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(4), pages 83-92.
    16. repec:ebl:ecbull:v:6:y:2005:i:2:p:1-15 is not listed on IDEAS
    17. Coulibaly, Issiaka & Gnimassoun, Blaise, 2013. "Optimality of a monetary union: New evidence from exchange rate misalignments in West Africa," Economic Modelling, Elsevier, vol. 32(C), pages 463-482.
    18. Julius Agbor Agbor, 2013. "The Future of the CEMAC CFA FRANC," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 1(1), pages 1-17.
    19. Philippe Aghion & Steven Durlauf (ed.), 2005. "Handbook of Economic Growth," Handbook of Economic Growth, Elsevier, edition 1, volume 1, number 1.
    20. Sebastian Edwards & Miguel A. Savastano, 1999. "Exchange Rates in Emerging Economies: What Do We Know? What Do We Need to Know?," NBER Working Papers 7228, National Bureau of Economic Research, Inc.
    21. Etienne B. Yehoue, 2006. "The CFA Arrangements: More Than Just an Aid Substitute?," Economie Internationale, CEPII research center, issue 107, pages 107-133.
    22. Klein, Michael W. & Shambaugh, Jay C., 2012. "Exchange Rate Regimes in the Modern Era," MIT Press Books, The MIT Press, edition 1, volume 1, number 026251799x, April.
    23. Rabah Arezki & Fuad Hasanov, 2013. "Global Imbalances and Petrodollars," The World Economy, Wiley Blackwell, vol. 36(2), pages 213-232, February.
    24. Jeannine Bailliu & Robert Lafrance & Jean‐François Perrault, 2003. "Does Exchange Rate Policy Matter for Growth?," International Finance, Wiley Blackwell, vol. 6(3), pages 381-414, November.
    25. Virginie Coudert & Cécile Couharde & Valérie Mignon, 2011. "Does Euro or Dollar Pegging Impact the Real Exchange Rate? The Case of Oil and Commodity Currencies," The World Economy, Wiley Blackwell, vol. 34(9), pages 1557-1592, September.
    26. Michael Bleaney & Manuela Francisco, 2005. "Inflation persistence and exchange rate regimes: evidence from developing countries," Economics Bulletin, AccessEcon, vol. 6(2), pages 1-15.
    27. Elbadawi, Ibrahim & Majd, Nader, 1996. "Adjustment and economic performance under a fixed exchange rate: A comparative analysis of the CFA zone," World Development, Elsevier, vol. 24(5), pages 939-951, May.
    28. Sfia, Mohamed Daly, 2007. "Le choix du régime de change pour les économies émergentes," MPRA Paper 4075, University Library of Munich, Germany.
    29. Dhaneshwar Ghura & Michael T. Hadjimichael, 1996. "Growth in Sub-Saharan Africa," IMF Staff Papers, Palgrave Macmillan, vol. 43(3), pages 605-634, September.
    30. Sebastian Edwards, 1992. "Exchange Rates as Nominal Anchors," NBER Working Papers 4246, National Bureau of Economic Research, Inc.
    31. Alfaro, Laura, 2005. "Inflation, openness, and exchange-rate regimes: The quest for short-term commitment," Journal of Development Economics, Elsevier, vol. 77(1), pages 229-249, June.
    32. Dubas, Justin M., 2009. "The Importance of the Exchange Rate Regime in Limiting Misalignment," World Development, Elsevier, vol. 37(10), pages 1612-1622, October.
    33. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    34. Ghura, Dhaneshwar & Grennes, Thomas J., 1993. "The real exchange rate and macroeconomic performance in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 42(1), pages 155-174, October.
    35. Ms. Iyabo Masha & Mr. Leighton S Harris & Mr. Jian-Ye Wang & Ms. Kazuko Shirono, 2007. "The Common Monetary Area in Southern Africa: Shocks, Adjustment, and Policy Challenges," IMF Working Papers 2007/158, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. 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.
    2. Cruz-Rodríguez, Alexis, 2022. "Exchange arrangements and economic growth. What relationship is there?," MPRA Paper 113897, University Library of Munich, Germany.
    3. Nchofoung, Tii N., 2022. "Trade shocks and labour market resilience in Sub-Saharan Africa: Does the franc zone response differently?," International Economics, Elsevier, vol. 169(C), pages 161-174.
    4. Issiaka Coulibaly, 2013. "Competitiveness and growth within the CFA franc zone: does the switch to the euro matter?," Erudite Working Paper 2013-04, Erudite.
    5. Christine O. Strong, 2021. "Did Mali benefit from joining the CFA zone? An analysis using the synthetic control method," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 931-955, May.
    6. Tadadjeu Wemba, Dessy-Karl & Essiane, Patrick-Nelson Daniel, 2019. "La crédibilité des politiques monétaires affecte-t-elle la croissance économique en Afrique subsaharienne? [Does the credibility of monetary policies affect economic growth in Sub-Saharan Africa?]," MPRA Paper 99961, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Issiaka Coulibaly, 2013. "Competitiveness and growth within the CFA franc zone: does the switch to the euro matter?," Erudite Working Paper 2013-04, Erudite.
    2. Lahura, Erick & Vega, Marco, 2013. "Regímenes cambiarios y desempeño macroeconómico: Una evaluación de la literatura," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 26, pages 101-119.
    3. Cruz-Rodríguez, Alexis, 2016. "An empirical assessment of exchange arrangements and inflation performance," MPRA Paper 73005, University Library of Munich, Germany.
    4. Ghosh, Amit, 2014. "How do openness and exchange-rate regimes affect inflation?," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 190-202.
    5. Cruz-Rodríguez, Alexis, 2022. "Exchange arrangements and economic growth. What relationship is there?," MPRA Paper 113897, University Library of Munich, Germany.
    6. Christopher Bowdler & Adeel Malik, 2005. "Openness and inflation volatility: cross-country evidence," CSAE Working Paper Series 2005-08, Centre for the Study of African Economies, University of Oxford.
    7. Ms. Janet Gale Stotsky & Mr. Manuk Ghazanchyan & Mr. Olumuyiwa S Adedeji & Mr. Nils O Maehle, 2012. "The Relationship Between the Foreign Exchange Regime and Macroeconomic Performance in Eastern Africa," IMF Working Papers 2012/148, International Monetary Fund.
    8. Salma Hadj Fraj & Mekki Hamdaoui & Samir Maktouf, 2018. "Governance and economic growth: The role of the exchange rate regime," International Economics, CEPII research center, issue 156, pages 326-364.
    9. Dao Thi-Thieu Ha & Nga Thi Hoang, 2020. "Exchange Rate Regime and Economic Growth in Asia: Convergence or Divergence," JRFM, MDPI, vol. 13(1), pages 1-15, January.
    10. Carlos De Almeida Cardoso & Flavio Vilela Vieira, 2016. "Crescimento Econômico E Regimes Cambiais: Análise De Painel," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 083, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    11. Ghanem Darine, 2012. "Fixed Exchange Rate Regimes and Inflation Performance: Evidence from MENA Countries," Review of Middle East Economics and Finance, De Gruyter, vol. 8(1), pages 1-30, August.
    12. Jeffrey Frankel, 2021. "Systematic Managed Floating," World Scientific Book Chapters, in: Steven J Davis & Edward S Robinson & Bernard Yeung (ed.), THE ASIAN MONETARY POLICY FORUM Insights for Central Banking, chapter 5, pages 160-221, World Scientific Publishing Co. Pte. Ltd..
    13. Dąbrowski, Marek A. & Papież, Monika & Śmiech, Sławomir, 2024. "Output volatility and exchange rates: New evidence from the updated de facto exchange rate regime classifications," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 894-908.
    14. Aizenman, Joshua & Chinn, Menzie D. & Ito, Hiro, 2011. "Surfing the waves of globalization: Asia and financial globalization in the context of the trilemma," Journal of the Japanese and International Economies, Elsevier, vol. 25(3), pages 290-320, September.
    15. Aghion, Philippe & Bacchetta, Philippe & Rancière, Romain & Rogoff, Kenneth, 2009. "Exchange rate volatility and productivity growth: The role of financial development," Journal of Monetary Economics, Elsevier, vol. 56(4), pages 494-513, May.
    16. Levy Yeyati, Eduardo & Sturzenegger, Federico, 2010. "Monetary and Exchange Rate Policies," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4215-4281, Elsevier.
    17. Petreski, Marjan, 2009. "Analysis of exchange-rate regime effect on growth: theoretical channels and empirical evidence with panel data," Economics Discussion Papers 2009-49, Kiel Institute for the World Economy (IfW Kiel).
    18. Terrones, Marco E., 2020. "Do fixers perform worse than non-fixers during global recessions and recoveries?," Journal of International Money and Finance, Elsevier, vol. 104(C).
    19. Yavari, Kazem & Najjarzade, Reza & Tavakolian, Hossein & Bahador, Ali, 2016. "Effect of Nominal Exchange Rate Volatility on Output in Iran’s Economy," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 11(4), pages 419-442, October.
    20. Rolf Maier, 2005. "Exchange Rate Regimes and Pro-Poor Growth," International Finance 0504008, University Library of Munich, Germany.

    More about this item

    Keywords

    Exchange rate management; CFA; monetary zones;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:54075. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.