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<p>The financial crisis, COVID-19 pandemic, Russian invasion of Ukraine, and political instability in French-speaking Africa have reversed the progress made in these regions, reigniting the debates on exchange rate regimes and their impact on trade and economic growth. This study investigates the causal relationship between pegging the CFA franc to the euro, terms of trade, and economic growth in the 14 Franco-African countries using data from the World Development Indicators (WDI) spanning from 1980 to 2022. The results obtained through a Panel ARDL model indicate that pegging the CFA franc negatively affects economic growth but positively impacts terms of trade. These findings provide valuable insights into the impact of pegging on economic growth and terms of trade in French-speaking African countries. Policymakers must carefully weigh the benefits of improved terms of trade against the costs of reduced economic growth when considering whether to maintain the CFA franc's peg to the euro.</p>

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Impact of pegging the CFA franc to the euro on terms of trade and economic growth in the franc zone

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2025年3月31日

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  • Bin Joachem Meh,
  • Jean Cedric. Kouam,
  • Ntoubia Larissa Ngapmen,
  • Denis A. Foretia

摘要

The financial crisis, COVID-19 pandemic, Russian invasion of Ukraine, and political instability in French-speaking Africa have reversed the progress made in these regions, reigniting the debates on exchange rate regimes and their impact on trade and economic growth. This study investigates the causal relationship between pegging the CFA franc to the euro, terms of trade, and economic growth in the 14 Franco-African countries using data from the World Development Indicators (WDI) spanning from 1980 to 2022. The results obtained through a Panel ARDL model indicate that pegging the CFA franc negatively affects economic growth but positively impacts terms of trade. These findings provide valuable insights into the impact of pegging on economic growth and terms of trade in French-speaking African countries. Policymakers must carefully weigh the benefits of improved terms of trade against the costs of reduced economic growth when considering whether to maintain the CFA franc's peg to the euro.