IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/830.html
   My bibliography  Save this paper

Fixed parity of the exchange rate and economic performance in the CFA zone : a comparative study

Author

Listed:
  • Elbadawi, Ibrahim
  • Majd, Nader

Abstract

The authors compare economic performance in the CFA (franc) zone with the economic performance in similar countries outside the CFA zone in recent years. The results of their model estimates indicate that the competitive position for CFA members was weaker in the second half of the 1980s than in the first half and weaker than in non-CFA countries in terms of output growth as well as the performance of exports, investment, and savings. The exception was domestic inflation: the CFA fared better on that front. Results for a longer-term comparison are somewhat mixed. The CFA zone performed better than the others in exports, domestic savings and investment, and inflation, but failed in the long run to distinguish itself in terms of economic growth. The authors use a modified control group approach to compare changes in macroeconomic indicators in the CFA countries with those in countries elsewhere in sub-Saharan Africa and similar low-income developing countries. They control for initial conditions, changing exogenous internal and world environment, and policy stance. Their approach allows for a formal testing of whether zone membership is a random choice. The implication of randomness is that the CFA zone economies would have performed the same as the rest of sub-Saharan Africa, for example, if there had been no zone. Their results show the assumption of randomness to be valid only for GDP growth and inflation.

Suggested Citation

  • Elbadawi, Ibrahim & Majd, Nader, 1992. "Fixed parity of the exchange rate and economic performance in the CFA zone : a comparative study," Policy Research Working Paper Series 830, The World Bank.
  • Handle: RePEc:wbk:wbrwps:830
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1992/01/01/000009265_3961002074726/Rendered/PDF/multi0page.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Shantayanan Devarajan & Jaime de Melo, 2015. "Adjustment with a Fixed Exchange Rate: Cameroon, Côte d'Ivoire, and Senegal," World Scientific Book Chapters,in: Developing Countries in the World Economy, chapter 4, pages 83-123 World Scientific Publishing Co. Pte. Ltd..
    2. Riccardo Faini & Jaime de Melo, 2015. "Adjustment, Investment and the Real Exchange Rate in Developing Countries," World Scientific Book Chapters,in: Developing Countries in the World Economy, chapter 6, pages 137-165 World Scientific Publishing Co. Pte. Ltd..
    3. Chhibber, Ajay, 1991. "Africa's rising inflation : causes, consequences, and cures," Policy Research Working Paper Series 577, The World Bank.
    4. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", pages 112-134.
    5. Guillaumont, Patrick & Guillaumont, Sylviane & Plane, Patrick, 1988. "Participating in African monetary unions: An alternative evaluation," World Development, Elsevier, vol. 16(5), pages 569-576, May.
    6. 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.
    7. Honohan, Patrick, 1990. "Monetary cooperation in the CFA zone," Policy Research Working Paper Series 389, The World Bank.
    8. Honohan, Patrick, 1992. "Price and monetary convergence in currency unions: The franc and rand zones," Journal of International Money and Finance, Elsevier, vol. 11(4), pages 397-410, August.
    9. Serven, Luis & Solimano, Andres, 1992. "Private Investment and Macroeconomic Adjustment: A Survey," World Bank Research Observer, World Bank Group, vol. 7(1), pages 95-114, January.
    10. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", pages 129-137.
    11. Devarajan, Shantayanan & de Melo, Jaime, 1987. "Evaluating participation in African monetary unions: A statistical analysis of the CFA Zones," World Development, Elsevier, vol. 15(4), pages 483-496, April.
    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. Rossum, M.T.A. & Tak, C.M., 1994. "The CFA franc zone : reason for participation," Serie Research Memoranda 0040, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    2. Savvides, Andreas, 1998. "Inflation and monetary policy in selected West and Central African countries," World Development, Elsevier, vol. 26(5), pages 809-827, May.
    3. Jian-Ye Wang & Nisreen H. Farhan & Amar Shanghavi & Márcio Valério Ronci & Misa Takebe, 2008. "The Choice of Monetary and Exchange Rate Arrangements for a Small, Open, Low-Income Economy; The Case of São Tomé and Príncipe," IMF Working Papers 08/118, International Monetary Fund.
    4. 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.
    5. Elbadawi, Ibrahim A & Soto, Raimundo, 1997. "Real Exchange Rates and Macroeconomic Adjustment in Sub-Saharan Africa and Other Developing Countries," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(3), pages 74-120, Supplemen.
    6. Patrick Plane, 1996. "La privatisation dans les pays en développement : déterminants et conséquences macro-économiques," Économie et Prévision, Programme National Persée, vol. 125(4), pages 19-36.
    7. Giorgioni, Gianluigi & Holden, Ken, 2002. "The crisis of the CFA Franc zone: the case of Cote d'Ivoire," Economic Modelling, Elsevier, vol. 19(4), pages 531-564, August.

    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:wbk:wbrwps:830. 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). General contact details of provider: http://edirc.repec.org/data/dvewbus.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.