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The CFA Arrangements: More than Just An Aid Substitute?

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  • Mr. Etienne B Yehoue

Abstract

The CFA franc zone has had one of the longest experiences with a fixed exchange rate for a convertible currency and regional integration of any group of developing countries. France, the anchor country, provides aid to support the zone. This paper asks whether the arrangements are more than just an aid substitute. The paper addresses this issue by evaluating the overall performance of the zone over the period 1960-2004. The analysis reveals that when the zone is hit by a negative shock, France increases its aid, thereby acting as a shock absorber. However, it also finds that the zone displays strong performance in two areas-price stability and fiscal policy. Thus the paper concludes that the arrangements are not an aid substitute; they have real macroeconomic value for the zone and complement aid.

Suggested Citation

  • Mr. Etienne B Yehoue, 2007. "The CFA Arrangements: More than Just An Aid Substitute?," IMF Working Papers 2007/019, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2007/019
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    Cited by:

    1. Sandrine Kablan, 2009. "Mesure de la performance des banques dans une zone d'ancrage monétaire: cas de la France et des pays de l'UMOA," EconomiX Working Papers 2009-6, University of Paris Nanterre, EconomiX.
    2. Barry Eichengreen, 2012. "Regional Financial Arrangements and the International Monetary Fund," Finance Working Papers 23354, East Asian Bureau of Economic Research.
    3. Carsten Hefeker, 2010. "Fiscal reform and monetary union in West Africa," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(1), pages 86-102.
    4. Leo Frey & Ulrich Volz, 2013. "Regional Financial Integration In Sub-Saharan Africa – An Empirical Examination Of Its Effects On Financial Market Development," South African Journal of Economics, Economic Society of South Africa, vol. 81(1), pages 79-117, March.
    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. Martina Metzger, 2008. "Regional Cooperation And Integration In Sub-Saharan Africa," UNCTAD Discussion Papers 189, United Nations Conference on Trade and Development.
    7. Martin Hallet, 2008. "The role of the euro in Sub-Saharan Africa and in the CFA franc zone," European Economy - Economic Papers 2008 - 2015 347, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

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