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Anchor currency and real exchange rates dynamics in the CFA Franc Zone

Author

Listed:
  • Cécile Couharde

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Issiaka Coulibaly

    (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel)

  • Olivier Damette

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

Abstract

Currency misalignments have been one of the focal points of interest in the literature devoted to the CFA Franc zone. Less attention has been paid, however, to the convergence process of real exchange rates towards equilibrium. In this paper, we analyze the short-run dynamics of real exchange rates of the CFA Franc zone countries and the role played by the anchor currency in their adjustment process. After controlling for the effects of the 1994 devaluation, we find the relationship between real exchange rates of the CFA Franc zone countries and of the euro to be substantial in size and subject to nonlinear effects.

Suggested Citation

  • Cécile Couharde & Issiaka Coulibaly & Olivier Damette, 2013. "Anchor currency and real exchange rates dynamics in the CFA Franc Zone," Post-Print hal-01385881, HAL.
    • Handle: RePEc:hal:journl:hal-01385881
    DOI: 10.1016/j.econmod.2013.05.005
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    2. Edouard Mien, 2020. "External and Internal Real Exchange Rates and the Dutch Disease in Africa: Evidence from a Panel of Nine Oil-Exporting Countries," Working Papers hal-03013571, HAL.
    3. Alexandre Henry, 2019. "Monetary Union, Competitiveness and Raw Commodity Dependence: Insights from Africa," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(2), pages 285-301, June.
    4. Daniel Simons & Rosmy Jean Louis, 2018. "Monetary union in West Africa and business cycles synchronicity: New evidence," The World Economy, Wiley Blackwell, vol. 41(10), pages 2828-2848, October.
    5. Blaise Gnimassoun, 2017. "Exchange rate misalignments and the external balance under a pegged currency system," Review of International Economics, Wiley Blackwell, vol. 25(5), pages 949-974, November.
    6. Adu, Raymond & Litsios, Ioannis & Baimbridge, Mark, 2022. "ECOWAS single currency: Prospective effects on trade," Journal of International Money and Finance, Elsevier, vol. 126(C).
    7. Andrea Salazar-Díaz & Aarón Levi Garavito-Acosta & Sergio Restrepo Ángel & Leidy Viviana Arcila-Agudelo, 2023. "Real Equilibrium Exchange Rate in Colombia: Thousands of VEC Models Approach," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 99, pages 33-78, July-Dece.
    8. Grekou, Carl, 2015. "Revisiting the nexus between currency misalignments and growth in the CFA Zone," Economic Modelling, Elsevier, vol. 45(C), pages 142-154.
    9. Adu, Raymond & Litsios, Ioannis & Baimbridge, Mark, 2019. "Real exchange rate and asymmetric shocks in the West African Monetary Zone (WAMZ)," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 59(C), pages 232-249.
    10. Carl Grekou, 2014. "Revisiting the nexus between currency misalignments and growth in the CFA Zone," Working Papers hal-04141364, HAL.
    11. Mien, Edouard, 2021. "External and internal exchange rates and the Dutch disease: Evidence from a panel of oil-exporting African countries," International Economics, Elsevier, vol. 167(C), pages 206-228.
    12. Edouard Mien, 2020. "External and Internal Real Exchange Rates and the Dutch Disease in Africa: Evidence from a Panel of Nine Oil-Exporting Countries," CERDI Working papers hal-03013571, HAL.
    13. DEGUENONVO, Cédric, 2017. "Real exchange rate misalignment in Senegal: effect on growth," MPRA Paper 84338, University Library of Munich, Germany.

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    More about this item

    Keywords

    CFA zone; Misalignments; Panel smooth transition model;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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