A Franc appraisal: the political economy of macroeconomic policy in the CFA zones

Thesis

This thesis analyses how economic policies and outcomes in 14 countries in Western and Central Africa are shaped by the CFA franc monetary arrangement with France. This is a complex institution that reflects tensions between macroeconomic policy considerations, ambitions on regional integration and the reality of post-colonial international relations. In light of increasing scrutiny, and reforms announced in 2019, the three main chapters examine leading contemporary issues and contribute to the current debate concerning the future of this Franco-African arrangement.

The first chapter analyses how a fixed exchange rate may restrict the ability of low-income, resource-rich economies to reap long-term benefits from natural resource endowments. Through the lens of the so-called resource curse, CFA members are shown to have a less favourable experience than neighbouring non-CFA countries.

The second chapter considers how the CFA arrangement may influence fiscal policy decisions in unintended and undesirable ways. The empirical findings show fiscal policy to be on an unsustainable path in the zones. They also show that countries’ fiscal stances are affected by the policies of fellow member countries, and that this effect is much stronger than in non-CFA Sub-Saharan African countries. Lastly, it argues that conventional fiscal frameworks are inadequate to address such an unconventional arrangement.

Chapter Three argues that a number of the economic and political factors that have supported the continuation of the CFA arrangement have receded markedly over the six decades since its members gained independence. In addition, policy restrictions imposed by the arrangement remain as relevant as ever, as the prior two chapters highlight.

Brought together, these chapters paint the CFA arrangement as increasingly difficult to justify in its current form from an economic and political perspective. However, the thesis conclusion describes why a growing case against the CFA franc may not be enough to precipitate sweeping changes.

Authors: Wilson, J

• Type of award: DPhil
• Level of award: Doctoral
• Awarding institution: University of Oxford
• Language: English
• Keywords: Francophone Africa; Macroeconomics; CFA franc; Post-colonial; Africa; Monetary unions; Macroeconomic policy; Currency unions
• Subjects: Economics; International Macroeconomics