The CFA Franc Zone: Euro Peg and Nominal Effective Exchange Rate Volatility in WAEMU and CEMAC

The CFA franc arrangements are routinely described as stable because the two CFA francs maintain a fixed parity against the euro. This paper asks what exactly is stabilized once the evolving external exposure of WAEMU and CEMAC is taken into account. It distinguishes bilateral nominal stability, domestic price stability, nominal and real effective exchange-rate stability, financial stability, and institutional credibility, while empirically focusing on one dimension: nominal effective exchange-rate (NEER) volatility. Ngouana (2012) showed for WAEMU that the NEER was roughly twice as volatile under the euro peg as under a counterfactual Special Drawing Rights (SDR) peg between 2001 and 2010. This paper conducts an audited replication using a harmonized month-end exchange-rate convention, extends the analysis through 2024, and applies the same framework to CEMAC. The expanded partner universe is selected empirically and confidence intervals are obtained from a paired circular moving-block bootstrap. Over 2001–2024, the euro/SDR standard-deviation ratio equals 2.00 for WAEMU and 3.05 for CEMAC. A dual-convention exercise shows that switching from monthly averages to month-end observations changes the magnitude of the ratio by up to 23 percent across zones and windows, without ever pushing it below one. The result also survives stress tests for dominant-dollar invoicing and for lagged, predetermined, and fixed trade weights. These exercises remain partial-equilibrium accounting counterfactuals; they do not identify the equilibrium consequences of adopting another regime. The findings therefore do not identify an optimal anchor. They establish that the conventional description of the CFA franc as “stable” refers primarily to bilateral nominal stability against the euro and cannot, without qualification, be extended to the currency’s multilateral external position.