The Costs and Benefits Analysis of CFA Membership: The Choice of an Exchange Rate Regime for the CFA Countries Zone

Mireille Linjouom

No RP2004-14, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: The paper determines an analytical framework defining the choice of an optimal exchange rate regime for a typical CFA country. The policymakers behave strategically to decide to adopt alternative exchange rate regime by minimizing their loss function under specific constraints like economic characteristics and political consideration. One concludes a CFA economy with less inflationary propensity and greater external shocks volatility will tend to select a flexible exchange rate regime.

Keywords: Central banking; Foreign exchange; Monetary policy (search for similar items in EconPapers)
Date: 2004
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