This paper examines the trade promoting effects of monetary union in the\ncontext of the CFA franc zone. Using the gravity model as a basis for predicting\nthe volume of trade between countries, the study attempts to estimate the\npotential for increased trade within the CFA franc zone. The study shows that\nthe CFA countries have experienced relatively low monetary growth, relatively\nstrict budgetary disciplines, and consistently low inflation. However,\nthe results of the study indicate that monetary union in the case of the CFA\nfranc zone did not promote economic integration among member countries\nin the form of expanded trade. The actual trade among these countries remained\nsmall despite the use of common foreign exchange policy and free\ntransferability of resources among these countries.
Loading....