Exchange Rate Strategies and Fiscal Performance in Sub-Saharan Africa
AbstractThis paper investigates the relationship between fiscal performance and movements in the exchange rates, the terms of trade, and other macroeconomic aggregates in 28 sub-Saharan African countries over the 1980-91 period. It finds that the tax base in most of these countries is heavily dependent on imports and import substitutes. Consequently, an overvaluation of the exchange rate in countries that adopt a fixed exchange rate strategy (CFA franc zone countries), when the purpose of the strategy is to restore the real exchange rate to its equilibrium through fiscal contraction, can result in a widening of the fiscal deficit. Those countries with a variable exchange rate strategy fail to attain price stability but are able to enhance their fiscal balance, competitiveness, and growth.
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.
Volume (Year): 41 (1994)
Issue (Month): 1 (March)
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Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- F3 - International Economics - - International Finance
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H5 - Public Economics - - National Government Expenditures and Related Policies
- H6 - Public Economics - - National Budget, Deficit, and Debt
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