Abstract
The objective of this paper is to assess the relationship between the devaluation of the CFA franc and output growth in the Franc Zone (note1). Hinging on the works carried out in Latin America and Asia, the article employs a pool data model to verify, if the January 12th, 1994 CFA franc devaluation had an impact on the output growth in these countries. Our results show that this devaluation had no impact on output growth. This can be explained by the fact that the real adjustment which should have preceded it failed.
Highlights
The traditional theory of balance of payments stipulates that a monetary devaluation would improve the competitiveness of the domestic products and would restore the balance equilibrium of the balance of trade
The report on the failure of the policy of stabilization introduced by the International Monetary Fund in Developing countries led certain authors to revise the efficiency of certain constituents of this economic measure
The policy of currency devaluation is in this line of sight
Summary
The traditional theory of balance of payments stipulates that a monetary devaluation (note 2) would improve the competitiveness of the domestic products and would restore the balance equilibrium of the balance of trade. Due to the multiplier phenomenon, this increases in demand of export goods and substitute's goods over the totality of the economy and would end afterward in an increase in the global demand, which in return would stimulate economic activity By relying on this vision, the International Monetary Fund (IMF) introduced the monetary devaluation as a component of the stabilization program to be applied in certain developing countries. These latter consider that the restoration of the balance of equilibrium in the balance of trade through currency devaluation is expensive in terms of production and employment They advanced several arguments, such as the contraction of the demand; further to a redistribution of income in favor of the actors for strong marginal inclination to be saved and the braking reducing the supply due to the increase of the cost of imported of inputs. This difference in results led Bahmani-Oskooee and Miteza ( 2003 ) to conclude that the results of empirical
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