Currency pegs and volatility in West African Economic and Monetary Union during COVID-19

This study examines how the COVID-19 pandemic affected the CFA franc (XOF) compared to the euro (EUR) within the West African Economic and Monetary Union (WAEMU). It is among the first to assess both currencies under systemic stress by combining event studies, risk metrics, and ARDL regressions. The results show that the CFA franc was significantly more volatile and suffered deeper losses than the euro despite being pegged to it. This outcome reflects the structural vulnerabilities of WAEMU's fixed exchange rate system. The findings reveal a critical need for greater policy flexibility, regional financial coordination, and reform of current currency arrangements to improve resilience to future shocks.