Does Monetary Integration Lead to Income Convergence in Africa? A Study of the CFA Monetary Area

Portuguese Economic Journal, 18(2), 67-85, 2019

Posted: 13 Aug 2021

See all articles by Souleymane Ndao

Souleymane Ndao

Independent

Nikolay Nenovsky

Bulgarian National Bank

Kiril Tochkov

Texas Christian University - Department of Economics

Date Written: December 3, 2018

Abstract

The CFA franc area is one of the oldest currency unions, but it has come under intense criticism recently for failing to promote economic growth and income convergence between member states. This paper examines the growth experience of the 14 member countries relative to a common benchmark over the period 1960–2011. In particular, we use a combination of parametric and non-parametric methods to study convergence patterns as well as growth dynamics and to identify the factors responsible for changes in relative per-capita income. The results indicate divergence tendencies that result in a bimodal distribution in the long run. The sharp devaluation of the CFA franc in 1994 increases intradistributional mobility which is directed towards lower income levels. The regression analysis suggests that openness, FDI, and financial development have a positive and robust effect on convergence in the currency union.

Keywords: African monetary integration, CFA zone, Convergence, Growth factors

JEL Classification: F45, O47, O55

Suggested Citation

Ndao, Souleymane and Nenovsky, Nikolay and Tochkov, Kiril, Does Monetary Integration Lead to Income Convergence in Africa? A Study of the CFA Monetary Area (December 3, 2018). Portuguese Economic Journal, 18(2), 67-85, 2019, Available at SSRN: https://ssrn.com/abstract=3888217

Souleymane Ndao

Independent ( email )

Nikolay Nenovsky

Bulgarian National Bank ( email )

str "St. Sofia" 5
Sofia, 1040
Bulgaria
+ 359 2 9145 1239 (Phone)
+ 359 2 980 24 25 (Fax)

Kiril Tochkov (Contact Author)

Texas Christian University - Department of Economics ( email )

Box 298510
Fort Worth, TX 76129
United States
817-257-7554 (Phone)
817-257-5058 (Fax)

HOME PAGE: http://personal.tcu.edu/ktochkov

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