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Current account balance and exchange rate adjustment in New Caledonia


Author Info

  • Florence Huart

    (University Lille 1)

  • Gaël Lagadec

    (University of New Caledonia)


New Caledonia has a structural trade deficit. Public transfers from the French State amount to a large part of credits in the current account balance. The local currency, the franc XPF, has had a fixed parity against the euro since 1999. In prospect of independence, which would imply a loss (or decrease) of transfers received from metropolitan France, we evaluate what would be the required adjustment in the F.XPF/euro exchange rate in order to prevent the current account balance from worsening. Results mainly depend on the evolution of the price of nickel.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 33 (2013)
Issue (Month): 1 ()
Pages: 113-125

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Handle: RePEc:ebl:ecbull:eb-12-00423

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Related research

Keywords: equilibrium exchange rate; external constraint; foreign trade elasticities; devaluation; nickel;

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  1. Artus, Jacques R., 1978. "Methods of assessing the long-run equilibrium value of an exchange rate," Journal of International Economics, Elsevier, Elsevier, vol. 8(2), pages 277-299, May.
  2. Paul Krugman, 1988. "Differences In Income Elasticities and Trends in Real Exchange Rates," NBER Working Papers 2761, National Bureau of Economic Research, Inc.
  3. Williamson, John, 1993. "Exchange Rate Management," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 103(416), pages 188-97, January.
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