Macroeconomic Effects of the CFA Franc Zone: Focused on the Business Cycle Aspects
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The CFA franc zone is a regional monetary system that many countries in Africa have maintained for a long period time, which is comparable to the euro zone in Europe. The purpose of this paper is to analyze the macroeconomic effects of the CFA franc zone from the perspective of business cycles, specifically focusing on recessions and recoveries. The analysis period covers from 1974 to 2021, and it includes 9 CFA franc zone countries and 9 other countries in sub-Saharan Africa. Recession is divided into recession depth and recession length, while recovery is divided into recovery strength and recovery length. These indicators are measured based on either GDP gap or GDP growth rate. According to the test results, the depth of the recession in the franc zone, based on the GDP gap, was more serious than the other countries, while there was no significant difference in the length of recession or recovery indicators. On the other hand, when inflation and economic growth rate are compared between the two groups, inflation in the franc zone was lower, but there was no significant difference in the economic growth rate. These results indicate that while the monetary integration of the franc zone has brought clear benefits in price stability, it has incurred costs in terms of the depth of recessions. Furthermore, the low similarity of business cycles among the franc zone countries indicates that the countries lack the characteristics of an optimal currency area, so it is likely that while the benefits of a currency area will be limited to price stability, the costs from volatile business cycles might be pronounced.
Abstract
The CFA franc zone is a regional monetary system that many countries in Africa have maintained for a long period time, which is comparable to the euro zone in Europe. The purpose of this paper is to analyze the macroeconomic effects of the CFA franc zone from the perspective of business cycles, specifically focusing on recessions and recoveries. The analysis period covers from 1974 to 2021, and it includes 9 CFA franc zone countries and 9 other countries in sub-Saharan Africa. Recession is divided into recession depth and recession length, while recovery is divided into recovery strength and recovery length. These indicators are measured based on either GDP gap or GDP growth rate. According to the test results, the depth of the recession in the franc zone, based on the GDP gap, was more serious than the other countries, while there was no significant difference in the length of recession or recovery indicators. On the other hand, when inflation and economic growth rate are compared between the two groups, inflation in the franc zone was lower, but there was no significant difference in the economic growth rate. These results indicate that while the monetary integration of the franc zone has brought clear benefits in price stability, it has incurred costs in terms of the depth of recessions. Furthermore, the low similarity of business cycles among the franc zone countries indicates that the countries lack the characteristics of an optimal currency area, so it is likely that while the benefits of a currency area will be limited to price stability, the costs from volatile business cycles might be pronounced.
참고문헌 (15)
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