Reserve Pooling in the Eastern Caribbean Currency Union and the CFA Franc Zone: A Comparative Analysis

Hazel Selvon, Tracy Polius and Oral Williams

No 2001/104, IMF Working Papers from International Monetary Fund

Abstract: The paper presents a comparison of the gains from the pooling of reserves, and hence reserve variability, in the Eastern Caribbean Currency Union (ECCU) and the CFA franc zone. The results indicate that countries within the ECCU area have achieved greater balance of payments protection than the CFA zone countries from the pooling of reserves. Unanticipated changes in the terms of trade lowered reserves in the CFA relative to the ECCU, which may reflect a greater reliance on primary commodities in the CFA compared with services in the ECCU.

Keywords: WP; CFA franc zone; average cost; balance of payments; ECCU countries reserve; foreign exchange; reserve variability; ECCU; reserve pooling; reserve management policy; variability benefit; imputed reserve; terms of trade shock; reserves of the ECCU; reserve variation; ECCU country; hypothetical reserves ECCU; opportunity cost; coverage ratios ECCU; Reserve positions; Terms of trade; Monetary unions; Reserves management; Reserve assets; West Africa; Caribbean (search for similar items in EconPapers)
Pages: 31
Date: 2001-08-01
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Citations: View citations in EconPapers (11)

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