Are the CFA Francs at their Equilibrium Level?

In the Franc Zone, the fixed parity of the CFA franc is debated again, while the eco, a substitute currency, is to be announced in the WAEMU. We investigate the question about potential exchange rate misalignments in the two monetary unions (WAEMU, CEMAC) of this institutional space. The diagnosis is established by reference to two theories and from a panel of 99 countries over the period 1990-2016: the PPP exchange rate level adjusted for the productivity level and the Behavioural Equilibrium Exchange rate (BEER). These two theoretical criteria provide different results across unions, and country-members or sub-periods. Results are robust to the definition of the productivity measurement and to the sample size. Overall, the end of the period does not suggest misalignments that could justify a change of the parity although national heterogeneities arise.

Plane. P, da Piedade C. (2022) Les francs CFA sont-ils à leur niveau d’équilibre, Revue Française d’économie, vol. 36(4), pp. 87-127, avril.