The CFA Franc Zone: a political re-evaluation twenty years after the advent of the Euro

Abstract

ABSTRACTAlthough the CFA monetary union is not an ‘optimal’ currency area as such, it has allowed member countries to benefit from the convertibility guaranteed by the French Treasury and from enhanced policy credibility in achieving low inflation rates.Both benefits may be under threat. The convertibility is under threat due to the harder budgetary commitments imposed on France by its membership of the Eurozone and the dwindling political interest in the CFA Franc Zone shown in France.The policy credibility is becoming costlier as evidenced by output-inflation trade-offs, which, although still more favourable than in comparable sub-Saharan African countries, have been declining since the 1994 devaluation period.