The Effects of XOF Pegging to EURO on Senegalese Balance of Payment

This paper relates about the Senegalese currency pegging to the euro currency and the effects on the balance of payment. The development of Senegal with a controlled pegging currency and the amelioration of the BOP are one of the achievements of this research. The paper is organized as follows: first, a review of literature to see the authors that have expressed their ideas about the topic. Second, the development situation of Senegalese international payments is developed. The Senegalese BOP is analyzing the different components of the BOP and establish the Senegalese BOP progression; the dangers of exchange rate pegging are enumerated to show the weakness of totally pegging for developing countries. Third, the econometric model about the effect of exchange rate on the BOP with the Mundell-Fleming model is established. To run the model we use annual date from 1948 to 2010. The main results of this paper are about the insignificancy of the euro-xof exchange rate to the BOP, the loose caused by the totally pegging with economics accords. The necessity for Senegal to have a currency that will have a controlled pegging and the new currency will be adjusted to the economic level.