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Foreign Capital Inflows, Economic Policies and the Real Exchange Rate in Sub Saharan Africa: Is there an Interaction Effect?

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  • Jacinta Nwachukwu

Abstract

This paper presents a dynamic heterogeneous panel data model in which the reaction of the real exchange rate to external finance includes interactions with the measure of the trade openness, fiscal, monetary and nominal exchange rate policies of twenty-four primary-exporting Sub-Saharan African countries from 1978-2001. As expected, a rise in international transfers by itself exerts an upward pressure on the real exchange rate. However, this estimated positive effect of capital inflows was offset by associated policy interventions to liberalise trade controls and address problems of credit rationing in the private sector. This augurs well for the achievement of the Millennium Development Goals.

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  • Jacinta Nwachukwu, 2008. "Foreign Capital Inflows, Economic Policies and the Real Exchange Rate in Sub Saharan Africa: Is there an Interaction Effect?," Global Development Institute Working Paper Series 2508, GDI, The University of Manchester.
    • Handle: RePEc:bwp:bwppap:2508
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    File URL: http://hummedia.manchester.ac.uk/institutes/gdi/publications/workingpapers/bwpi/bwpi-wp-2508.pdf
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    Cited by:

    1. Emmanuel Owusu-Sekyere & Reneé van Eyden & Francis M Kemegue, 2014. "Remittances and the Dutch Disease in Sub-Saharan Africa: A Dynamic Panel Approach," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 8(3), September.
    2. Nwachukwu, Jacinta, 2011. "Halving poverty in HIPC countries by 2015: How costly if achievable?," Journal of Policy Modeling, Elsevier, vol. 33(2), pages 213-225, March.

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