Persistent inequality in Guinea-Bissau: The role of France, the CFA Franc, and long-term currency imperialism

Abstract

Guinea-Bissau is among the world’s most unequal countries. Its use of the CFA currency, pegged to the euro and controlled by France, raises continuing concern. This paper investigates the impact of joining the C.F.A zone (1997) on Guinea-Bissau per capita GDP, fisheries capture, and rice yields. In the absence of randomisation, we apply a synthetic control method SCM (Abadie and Gardeazabal, 2003) to build a counterfactual using a weighted combination of potential countries as control units and estimate the effects of entering the CFA zone on economic growth. The SCM results for Guinea-Bissau suggested that joining the CFA union contributed substantially to the decline of per capita GDP, fisheries capture, and rice yields. Other economic indicators such as cotton seed net per capita production and cashew nuts yields included in our study were inconclusive. Overall, Guinea-Bissau did not show evidence of economic growth after it entered the Franc zone. The country has been in long-term decline since then.