The CFA franc zone and fiscal discipline

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Abstract

There are reasons to believe that establishing a monetary union might either strengthen or weaken fiscal discipline in member states. The same could be said for the establishment of an exchange rate peg with full convertibility. I ask why neither of these two mechanisms has promoted fiscal discipline in the CFA Zone. I conclude that this failure is, in part, attributable to serious problems of institutional design involving the set-up of the two Franc Zone central banks, the monetary rules with which the central banks operated, and the relationship between the CFA states and France. But political interests, in France and in Africa, have been more important in the CFA Zone's failure to promote fiscal discipline in the sense that they have affected both the design of rules and institutions during periods of reform, and the application of these rules and functioning of these institutions during periods of crisis.

Original languageEnglish (US)
Pages (from-to)132-167
Number of pages36
JournalJournal of African Economies
Volume6
Issue number1
DOIs
StatePublished - Mar 1997

ASJC Scopus subject areas

  • Development
  • Economics and Econometrics

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