Anchor currency and real exchange rates dynamics in the CFA Franc Zone

Cécile Couharde (1) , Issiaka Coulibaly (2) , Olivier Damette (3)

1 EconomiX - EconomiX
2 ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique
3 BETA - Bureau d'Économie Théorique et Appliquée

Currency misalignments have been one of the focal points of interest in the literature devoted to the CFA Franc zone. Less attention has been paid, however, to the convergence process of real exchange rates towards equilibrium. In this paper, we analyze the short-run dynamics of real exchange rates of the CFA Franc zone countries and the role played by the anchor currency in their adjustment process. After controlling for the effects of the 1994 devaluation, we find the relationship between real exchange rates of the CFA Franc zone countries and of the euro to be substantial in size and subject to nonlinear effects.

Mots clés: CFA zone; Misalignments; Panel smooth transition model

Domaines: Economies et finances

Cécile Couharde, Issiaka Coulibaly, Olivier Damette. Anchor currency and real exchange rates dynamics in the CFA Franc Zone. Economic Modelling, 2013, 33, pp.722 -732. ⟨10.1016/j.econmod.2013.05.005⟩. ⟨hal-01385881⟩