Information Center: exchange rate policy

The trade shares methodology of Armington was employed to estimate coffee and cocoa export functions and to investigate the impact of CFA Zone membership and the CFA-French franc peg on the performance of the CFA countries (Cameroon, Cote d'Ivoire) vis-a-vis nonCFA exporters of coffee (Brazil, Colombia, Costa Rica, El Salvador, Guatemala, Indonesia, Kenya, Mexico, Tanzania) to various markets (U.S., U.K., Netherlands, Japan, Italy, Germany, France, Denmark, Belgium); similarly for CFA performance relative to nonCFA exporters of cocoa (Brazil, Ecuador, Ghana, Nigeria) to the U.S., U.K., Netherlands, Italy, Germany and France. The CFA-French franc peg significantly affected the performance of the CFA countries through relative prices (competitiveness). The peg also exposed the CFA countries to real exchange rate variability, partially due to the influence of the French franc, which significantly affected their performance by creating uncertainty and inhibiting diversification.