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Effets de long terme du taux de change réel sur la balance commerciale nominale et réelle en zone Franc africaine
[Long-run effects of real exchange rate on the nominal and real trade balance in African Franc zone]

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  • Chassem, Nacisse Palissy
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    Abstract

    The purpose of this study is to determine the long-run effects of changes in real exchange rate on the nominal (in value) and real (in volume) trade balance for the countries of the African Franc zone. These countries together have a common currency: the CFA franc, whose parity with the euro is fixed. By applying the cointegration bounds testing approach of Pesaran et al. (2001) on annual data from 1970 to 2006, the study shows, for each of the countries studied, the existence of a long-run relationship between the real trade balance, the real national GDP, real world GDP and the real exchange rate. In addition, the study reverses the empirical validity of the Marshall-Lerner condition for almost all countries of the African Franc zone. On the contrary, the depreciation of the real exchange rate deteriorates the nominal trade balance of these countries. This result could be attributed to the value effect of the depreciation of the real exchange rate, but also to the contraction of the volume effect due to the low competitiveness of exports from these countries, coupled with the strong dependence of their economies in relation to imports of capital goods and equipment and certain consumer goods prized by the population. These last statements are confirmed by the effect on the real trade balance of the depreciation of the real exchange rate which is negative or null for at least 10 of the 14 countries of the African Franc zone.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30252.

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    Date of creation: 09 Apr 2011
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    Handle: RePEc:pra:mprapa:30252

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    Keywords: eal exchange rate; Trade balance; Marshall-Lerner condition; Bounds testing approach of cointegration; African Franc zone;

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    1. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    2. Kwalingana, Samson & Nkuna, Onelie, 2009. "The Determinants of Current Account Imbalances in Malawi," MPRA Paper 14694, University Library of Munich, Germany.
    3. Mohsen Bahmani-Oskooee, 1998. "Cointegration Approach to Estimate the Long-Run Trade Elasticities in LDCs," International Economic Journal, Taylor & Francis Journals, vol. 12(3), pages 89-96.
    4. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    5. Drama, Bedi Guy Herve, 2010. "The Effects of Real Exchange Rate on Trade Balance in Cote d’Ivoire: Evidence from the Cointegration Analysis and Error-Correction Models," MPRA Paper 21810, University Library of Munich, Germany.
    6. Tuck Cheong Tang & Mahendhiran Nair, 2002. "A cointegration analysis of Malaysian import demand function: reassessment from the bounds test," Applied Economics Letters, Taylor & Francis Journals, vol. 9(5), pages 293-296.
    7. Boyd, Derick & Caporale, Gugielmo Maria & Smith, Ron, 2001. "Real Exchange Rate Effects on the Balance of Trade: Cointegration and the Marshall-Lerner Condition," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 187-200, July.
    8. Tang, Tuck Cheong, 2003. "Japanese aggregate import demand function: reassessment from the 'bounds' testing approach," Japan and the World Economy, Elsevier, vol. 15(4), pages 419-436, December.
    9. Morel, Louis & Perron, Benoit, 2003. "Relation entre le taux de change et les exportations nettes : test de la condition Marshall-Lerner pour le Canada," L'Actualité Economique, Société Canadienne de Science Economique, vol. 79(4), pages 481-502, Décembre.
    10. repec:ebl:ecbull:v:5:y:2003:i:18:p:1-13 is not listed on IDEAS
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