The CFA Franc Zone: Currency Union and Monetary Standard
IMF Working Papers, December 1, 1991
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- The CFA Franc Zone: Currency Union and Monetary Standard
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Bibliographic details
- Authors: James M. Boughton
- Published: December 1, 1991
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451931990.001
Summary
- The CFA franc zone comprises a group of countries in central and west Africa whose currencies have been firmly linked to the French franc since 1948.
- The arrangement combines the features of a currency union with those of an exchange rate peg.
- An analysis of the system's effectiveness must examine both dimensions: the currency-union aspects among the African countries and the exchange-rate-peg relationship with France.
- Viewed solely from the perspective of a currency union among the African countries, the zone would not constitute an optimum currency area.
- When France is viewed as an integral part of the system, the benefits become clearer, including:
- discipline,
- credibility, and
- stability in international competitiveness.
Analysis and Major Themes
- Dual nature of the arrangement:
- Currency union features among member African countries.
- Exchange rate peg to the French franc.
- Optimum currency area assessment:
- The zone does not meet the criteria of an optimum currency area if only African member countries are considered.
- Role of France:
- Inclusion of France in the analytical framework changes the evaluation of benefits.
- France’s role contributes to discipline, credibility, and stability in international competitiveness.
Policy Implications and Conclusions
- Effective assessment requires treating the CFA franc zone both as a currency union and as a monetary standard pegged to France.
- The presence of France as an integral component of the system underpins key benefits that might otherwise be absent in a stand-alone African currency union.