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Current account balance and exchange rate adjustment in New Caledonia

Author

Listed:
  • Florence Huart

    (University Lille 1)

  • Gaël Lagadec

    (University of New Caledonia)

Abstract

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.

Suggested Citation

  • Florence Huart & Gaël Lagadec, 2013. "Current account balance and exchange rate adjustment in New Caledonia," Economics Bulletin, AccessEcon, vol. 33(1), pages 113-125.
    • Handle: RePEc:ebl:ecbull:eb-12-00423
    as

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    References listed on IDEAS

    as
    1. Krugman, Paul, 1989. "Differences in income elasticities and trends in real exchange rates," European Economic Review, Elsevier, vol. 33(5), pages 1031-1046, May.
    2. Mr. Stephen Tokarick, 2010. "A Method for Calculating Export Supply and Import Demand Elasticities," IMF Working Papers 2010/180, International Monetary Fund.
    3. Williamson, John, 1993. "Exchange Rate Management," Economic Journal, Royal Economic Society, vol. 103(416), pages 188-197, January.
    4. repec:zbw:bofitp:2004_001 is not listed on IDEAS
    5. Artus, Jacques R., 1978. "Methods of assessing the long-run equilibrium value of an exchange rate," Journal of International Economics, Elsevier, vol. 8(2), pages 277-299, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    equilibrium exchange rate; external constraint; foreign trade elasticities; devaluation; nickel;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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