Do currency unions deliver more economic integration than fixed exchange rates? Evidence from the Franc Zone and the ECCU

In this article we develop a model to identify determinants of macroeconomic integration in the African Franc Zone and in Dollar-pegging Caribbean countries (including members of the East Caribbean Currency Union). These two groups of countries each comprise states using several different local currencies: on the one hand the UEMOA CFA Franc and the CEMAC CFA Franc (both pegged to the Euro), on the other the ECCU Dollar and other national Dollar pegged currencies. The purpose of the analysis is to distinguish the effect of monetary union on macroeconomic integration from the effect of pegging to a common OECD currency.