The impact of currency unions on trade: lessons from CFA franc zone and implications for proposed African monetary unions

Chrysost Bangake and Jude Eggoh
Savings and Development Vol. 33(2009), No. 1, pp. 61-72

In this paper we explore whether the two existing currency unions in CFA Franc zone have a significant increase in trade between members. Furthermore, the impact of regional agreements which are only based on preferential trade (ECOWAS, COMESA, and SADC) is also analysed. Using panel techniques for 35 countries in Africa on the period 1980-2005, our empirical results strongly support that existing currency unions in CFA zone enhance significantly the trade between members. However, the Rose effect is more substantial in UEMOA than in CEMAC. Our results show that during their implementation the regional agreements which are only based on preferential trade (ECOWAS for example) have generated a little increase in trade compared to countries in currency unions. These results are highly interesting and have some policy implications for the proposed monetary unions in Africa.

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Issue: 2009 XXXIII 1
Contributors: Bangake, Chrysost   Eggoh, Jude   
Keywords: , , , ,