IMF Working Papers

Reserve Pooling in the Eastern Caribbean Currency Union and the CFA Franc Zone: A Comparative Analysis

ByHazel Selvon, Tracy Polius, Oral Williams

August 1, 2001

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Hazel Selvon, Tracy Polius, and Oral Williams. "Reserve Pooling in the Eastern Caribbean Currency Union and the CFA Franc Zone: A Comparative Analysis", IMF Working Papers 2001, 104 (2001), accessed 12/24/2025, https://doi.org/10.5089/9781451852769.001

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The paper presents a comparison of the gains from the pooling of reserves, and hence reserve variability, in the Eastern Caribbean Currency Union (ECCU) and the CFA franc zone. The results indicate that countries within the ECCU area have achieved greater balance of payments protection than the CFA zone countries from the pooling of reserves. Unanticipated changes in the terms of trade lowered reserves in the CFA relative to the ECCU, which may reflect a greater reliance on primary commodities in the CFA compared with services in the ECCU.

Subject: Central banks, Currencies, Economic integration, International trade, Monetary unions, Reserve assets, Reserve positions, Reserves management, Terms of trade, Treasury bills and bonds

Keywords: average cost, balance of payments, Caribbean, CFA franc zone, coverage ratios ECCU, ECCU, ECCU countries reserve, ECCU country, foreign exchange, hypothetical reserves ECCU, imputed reserve, Monetary unions, opportunity cost, Reserve assets, reserve management policy, reserve pooling, Reserve positions, reserve variability, reserve variation, Reserves management, reserves of the ECCU, Terms of trade, terms of trade shock, variability benefit, West Africa, WP

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