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Current account balance and exchange rate adjustment in New Caledonia

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  • 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.

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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, vol. 8(2), pages 277-299, May.
  2. Krugman, Paul, 1989. "Differences in income elasticities and trends in real exchange rates," European Economic Review, Elsevier, vol. 33(5), pages 1031-1046, May.
  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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