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The Effects of Domestic Policies and External Factors on the Real Exchange Rate and Economic Performance in Sub-Saharan Africa

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  • Jonathan Ikoba
  • Akorlie A. Nyatepe-Coo
  • Oluwole Owoye

Abstract

This paper examines the relative contributions of domestic and external factors to real exchange rate changes in six sub-Sahara African countries during the period 1960–91. A vector autoregression (VAR) model is used to analyze the interrelationships between the current account, the budget balance and the real exchange rate. The results suggest that external factors such as the terms of trade and foreign income were as important as domestic policy mistakes in causing real exchange rate misalignment in sub-Saharan Africa.

Suggested Citation

  • Jonathan Ikoba & Akorlie A. Nyatepe-Coo & Oluwole Owoye, 1996. "The Effects of Domestic Policies and External Factors on the Real Exchange Rate and Economic Performance in Sub-Saharan Africa," The American Economist, Sage Publications, vol. 40(1), pages 92-103, March.
    • Handle: RePEc:sae:amerec:v:40:y:1996:i:1:p:92-103
    DOI: 10.1177/056943459604000111
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    1. Jeffrey D. Sachs, 1985. "External Debt and Macroeconomic Performance in Latin America and East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(2), pages 523-573.
    2. Cottani, Joaquin A & Cavallo, Domingo F & Khan, M Shahbaz, 1990. "Real Exchange Rate Behavior and Economic Performance in LDCs," Economic Development and Cultural Change, University of Chicago Press, vol. 39(1), pages 61-76, October.
    3. Dornbusch, Rudiger, 1982. "Stabilization policies in developing countries: What have we learned?," World Development, Elsevier, vol. 10(9), pages 701-708, September.
    4. Christopher A. Sims, 1982. "Policy Analysis with Econometric Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 107-164.
    5. Susan M. Collins, 1989. "Debt, Policy, and Performance: An Introduction," NBER Chapters, in: Developing Country Debt and Economic Performance, Volume 3: Country Studies - Indonesia, Korea, Philippines, Turkey, pages 1-16, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Ali, Abdulkadir I. & Ajibola, Isaiah O. & Omotosho, Babatunde S. & Adetoba, Olutope O. & Adeleke, Abiola O., 2015. "Real exchange rate misalignment and economic growth in Nigeria," MPRA Paper 98526, University Library of Munich, Germany.
    2. Kenny S, Victoria, 2019. "Macroeconomic Performance Indicators and Exchange Rate Misalignment in Nigeria," MPRA Paper 93292, University Library of Munich, Germany.
    3. Hanaa Kheir-El-Din & Sherine El-Shawarby, 2000. "Trade and Foreign Exchange Regime in Egypt," Working Papers 2034, Economic Research Forum, revised 11 Sep 2000.

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