For most sub-Saharan African countries, a high commodity dependence on a few agricultural, minera... more For most sub-Saharan African countries, a high commodity dependence on a few agricultural, mineral or metal products in their exports has made them particularly vulnerable to frequent shocks in their terms of trade, global financial crises and economic recession. In some cases, a flexible exchange rate might have helped to alleviate the economic costs of these external shocks. For other countries, such as Communauté Financière Africaine (CFA) member states lower levels of inflation than their neighbours’ has been achieved. The empirical framework presented in this paper, provides a way of weighing these costs and benefits. This paper considers whether CFA zone membership is really beneficial in terms of economic stability. In other words, to what extent is the CFA zone’s economic performance due to its exchange rate regime?
ABSTRACT This paper aims at studying the sustainability of current accounts in Sub-Saharan Africa... more ABSTRACT This paper aims at studying the sustainability of current accounts in Sub-Saharan Africa and determining whether this sustainability depends on the exchange rate regime. Relying on a formal theoretical framework and recent panel cointegration techniques, our findings show that current accounts have been globally sustainable in Sub-Saharan Africa countries over the 1980–2011 period. However, this sustainability has been lower for countries operating a fixed exchange rate regime or belonging to a monetary union. We also find that the difference in the level of sustainability could be explained by a higher persistence in the current account adjustment of countries operating under rigid exchange rate regimes.
ABSTRACT In this paper, we seek to analyze the impacts exerted by the substitution of the French ... more ABSTRACT In this paper, we seek to analyze the impacts exerted by the substitution of the French franc for the euro on real and nominal effective exchange rates, competitiveness and growth within the CFA zone. Our findings show that, since the advent of the euro, the evolution of the real exchange rates and the competitiveness (measured by currency misalignments) have become increasingly dependent on nominal exchange rate movements and therefore on the evolution of the anchor currency. While the appreciation of the euro in the last decade did not translate into strong and generalized currency overvaluations—expect in Central African Republic, Benin and Equatorial Guinea—it had however strongly reduced the extend of real undervaluations induced by the 1994 devaluation of the CFA franc. This has resulted in an increasingly negative effect exerted by real and nominal appreciations on growth rates of these countries since the switch to the euro.
In this paper, we analyse currencies' misalignments of the CFA zone countries and the adjust... more In this paper, we analyse currencies' misalignments of the CFA zone countries and the adjustment process of their real effective exchange rates towards their equilibrium level over the period 1985-2007. To this end, we firstly estimate, using panel cointegration techniques, a long term relationship between the real effective exchange rate and economic fundamentals. Secondly, we estimate a panel smooth transition error correction model in order to take into account non linearities in the convergence process of real exchange rates towards their equilibrium level. Two main results emerge from our analysis. Firstly, the real appreciation of effective exchange rates in the CFA zone countries from the 2000s did not translate, in 2007, into a real overvaluation comparable to that occurring before the devaluation of the CFA franc in 1994. However, some countries are exceptions, indicating a strong heterogeneity within the CFA zone. Finally, the convergence process of real effective exc...
For most sub-Saharan African countries, a high commodity dependence on a few agricultural, minera... more For most sub-Saharan African countries, a high commodity dependence on a few agricultural, mineral or metal products in their exports has made them particularly vulnerable to frequent shocks in their terms of trade, global financial crises and economic recession. In some cases, a flexible exchange rate might have helped to alleviate the economic costs of these external shocks. For other countries, such as Communauté Financière Africaine (CFA) member states lower levels of inflation than their neighbours’ has been achieved. The empirical framework presented in this paper, provides a way of weighing these costs and benefits. This paper considers whether CFA zone membership is really beneficial in terms of economic stability. In other words, to what extent is the CFA zone’s economic performance due to its exchange rate regime?
ABSTRACT This paper aims at studying the sustainability of current accounts in Sub-Saharan Africa... more ABSTRACT This paper aims at studying the sustainability of current accounts in Sub-Saharan Africa and determining whether this sustainability depends on the exchange rate regime. Relying on a formal theoretical framework and recent panel cointegration techniques, our findings show that current accounts have been globally sustainable in Sub-Saharan Africa countries over the 1980–2011 period. However, this sustainability has been lower for countries operating a fixed exchange rate regime or belonging to a monetary union. We also find that the difference in the level of sustainability could be explained by a higher persistence in the current account adjustment of countries operating under rigid exchange rate regimes.
ABSTRACT In this paper, we seek to analyze the impacts exerted by the substitution of the French ... more ABSTRACT In this paper, we seek to analyze the impacts exerted by the substitution of the French franc for the euro on real and nominal effective exchange rates, competitiveness and growth within the CFA zone. Our findings show that, since the advent of the euro, the evolution of the real exchange rates and the competitiveness (measured by currency misalignments) have become increasingly dependent on nominal exchange rate movements and therefore on the evolution of the anchor currency. While the appreciation of the euro in the last decade did not translate into strong and generalized currency overvaluations—expect in Central African Republic, Benin and Equatorial Guinea—it had however strongly reduced the extend of real undervaluations induced by the 1994 devaluation of the CFA franc. This has resulted in an increasingly negative effect exerted by real and nominal appreciations on growth rates of these countries since the switch to the euro.
In this paper, we analyse currencies' misalignments of the CFA zone countries and the adjust... more In this paper, we analyse currencies' misalignments of the CFA zone countries and the adjustment process of their real effective exchange rates towards their equilibrium level over the period 1985-2007. To this end, we firstly estimate, using panel cointegration techniques, a long term relationship between the real effective exchange rate and economic fundamentals. Secondly, we estimate a panel smooth transition error correction model in order to take into account non linearities in the convergence process of real exchange rates towards their equilibrium level. Two main results emerge from our analysis. Firstly, the real appreciation of effective exchange rates in the CFA zone countries from the 2000s did not translate, in 2007, into a real overvaluation comparable to that occurring before the devaluation of the CFA franc in 1994. However, some countries are exceptions, indicating a strong heterogeneity within the CFA zone. Finally, the convergence process of real effective exc...
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