| The CFA franc, currency for 13 West and Central African countries (the CFA zone), has been tied to the French franc via a fixed exchange rate arrangement since 1948. Proponents of the fixed parity rate argue that it provides price stability for the African countries, while opponents contend that it contributes to poor economic performance by sending incorrect signals to the domestic economy. Further, France's ability to maintain the current arrangement is uncertain in light of the approaching economic integration in Europe. After reviewing the history of the CFA zone, this paper assesses the appropriateness of the fixed rate arrangement for the zone, with emphasis placed on recent events, especially the1994 devaluation of the CFA franc. The paper then... |
