Currency, Crisis, and Capitalism: Central Bank Politics and Macroeconomic Fluctuations in Burkina Faso, Mali, and Niger

Abstract

Using historical analysis, relevant case studies, and collected economic data, this thesis reviews the potential economic effects of an independent central banking system in Burkina Faso, Mali, and Niger. The metrics used to judge economic change include export performance, real GDP, as well as inflation in tandem with economic stability. However, a scarcity of English-language sources and publicly available economic data should be noted. West African countries of the Sahel region have long operated under an imposed exchange rate regime, with their currency having a strict peg to the euro. This exchange rate is guaranteed by France and their treasury, which has raised direct accusations of foreign meddling and neocolonialism. An analysis of separate cases shows that, while independent central banks are not harbingers of economic contractions, careful consideration regarding stabilizing policies following monetary independence must take place. In this sense, central bank independence can be viewed as largely positive, but necessitating operable policies which allow for the institution to operate without intervention. The relevance of these cases is multifaceted: not only are they appropriately contextualized by their location in West Africa, but their experimentation with a central banking system divorced from French influence provides comparable, parallel examples for the Sahel. If an independent currency were to be fully implemented, considering that the military juntas have outlined a tangible policy initiative, then they must implement complementary policies in order to balance economic growth and stability. Policy implications include the potential employing devaluation policies to increase the competitiveness of exports, and the insulating of central banks away from outsized, external influence.