Evaluating the net gains from the CFA Franc Zone membership: A different perspective

Abstract

This paper deals with the membership gains derived by the CFA Franc Zone member countries. After briefly discussing the current institutional framework of the Franc Zone rules, we use the partial pooled reserves methodology developed by Dodsworth to compute the net gains derived from CFA Franc countries. Actual data of the operations account were used for the first time for the computation. The net membership gains were calculated for both the Western African Monetary Union (UMOA) and the Central African CFA Franc Zone. We conclude that when the opportunity costs of maintaining the operations account at the French Treasury are taken into consideration, especially the interest rate costs and the exchange rate risks, the evidence shows that overall, there are more net losers than gainers in the CFA Franc Zone with the 65% reserves pooling for the study period 1975–1988.