IDEAS home Printed from https://ideas.repec.org/a/ags/reapec/143427.html
   My bibliography  Save this article

Impact of Exchange Rate Policy on the Trade of Industrial Products in Sub-Saharan Africa from 1975 to 2007

Author

Listed:
  • Ngongang, Elie

Abstract

The purpose of this paper is to study the potential repercussions of exchange rate policy on the trade of industrial products in Sub-Saharan African (SSA) countries. Panel data from 22 countries was used to estimate the impact of exchange rate policy on the trade of industrial products. In this respect, the effects of three indicators were analysed, namely, the effective real exchange rate (ERER) changes, real exchange rate (RER) volatility, and (model-based measures of) RER misalignment. The method of analysis consists of estimating export equations for four manufacturing sectors (chemicals, textiles, metallurgy, and wood) and two exchange rate regimes, namely, a fixed exchange rate regime represented by the 12 countries of the CFA Franc Zone (CFZ), and a second and more flexible regime, represented by 10 countries outside the CFZ. The results of the study suggest that exchange rate policy exerts a significantly positive impact on external trade performance through changes in the effective real exchange rate, and a negative impact through its misalignment. These results also reveal that it is very important to take account of the framework of economic orientations that accompany the exchange rate policies when assessing their effects on the aggregate behaviour, of the economy.

Suggested Citation

  • Ngongang, Elie, 2011. "Impact of Exchange Rate Policy on the Trade of Industrial Products in Sub-Saharan Africa from 1975 to 2007," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 0(Number 1-), pages 1-27, March.
    • Handle: RePEc:ags:reapec:143427
    as

    Download full text from publisher

    File URL: http://ageconsearch.umn.edu/record/143427/files/6-Elie%20Ngongang.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Barrios, Victor E. & Blanco, Juan M., 2003. "The effectiveness of bank capital adequacy regulation: A theoretical and empirical approach," Journal of Banking & Finance, Elsevier, vol. 27(10), pages 1935-1958, October.
    2. Kasa, Kenneth, 1992. "Adjustment costs and pricing-to-market theory and evidence," Journal of International Economics, Elsevier, vol. 32(1-2), pages 1-30, February.
    3. Kenen, Peter B & Rodrik, Dani, 1986. "Measuring and Analyzing the Effects of Short-term Volatility in Real Exchange Rates," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 311-315, May.
    4. Dixit, Avinash, 1995. "Irreversible investment with uncertainty and scale economies," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 327-350.
    5. Ricardo J. Caballero & Eduardo M.R.A. Engel, 1998. "Nonlinear Aggregate Investment Dynamics: Theory and Evidence," NBER Working Papers 6420, National Bureau of Economic Research, Inc.
    6. Jacob A. Frenkel & Morris Goldstein, 1988. "Exchange rate volatility and misalignment: evaluating some proposals for reform," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 185-231.
    7. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584-584.
    8. Caballero, Ricardo J. & Corbo, Vittorio, 1989. "How does uncertainty about the real exchange rate affect exports?," Policy Research Working Paper Series 221, The World Bank.
    9. De Grauwe, Paul, 1987. "International trade and economic growth in the european monetary system," European Economic Review, Elsevier, vol. 31(1-2), pages 389-398.
    10. Hooper, Peter & Kohlhagen, Steven W., 1978. "The effect of exchange rate uncertainty on the prices and volume of international trade," Journal of International Economics, Elsevier, vol. 8(4), pages 483-511, November.
    11. Avinash Dixit, 1989. "Hysteresis, Import Penetration, and Exchange Rate Pass-Through," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 205-228.
    12. Sapir, Andre & Sekkat, Khalid, 1995. "Exchange rate regimes and trade prices Does the EMS matter?," Journal of International Economics, Elsevier, vol. 38(1-2), pages 75-94, February.
    13. Froot, Kenneth A & Klemperer, Paul D, 1989. "Exchange Rate Pass-Through When Market Share Matters," American Economic Review, American Economic Association, vol. 79(4), pages 637-654, September.
    14. Sanjeev Gupta, 1998. "Does Corruption Affect Income Inequality and Poverty?," IMF Working Papers 98/76, International Monetary Fund.
    15. Patrick Guillaumont & Sylviane Guillaumont Jeanneney, 1997. "De l'effectivité de la dévaluation des francs CFA. Quelques enseignements tirés du Cameroun et de la Côte-d'Ivoire," Revue Économique, Programme National Persée, vol. 48(3), pages 451-460.
    16. Virginie Coudert, 1999. "Comment definir un taux de change d'equilibre pour les pays emergents ?," Economie Internationale, CEPII research center, issue 77, pages 45-66.
    17. Gagnon, Joseph E., 1993. "Exchange rate variability and the level of international trade," Journal of International Economics, Elsevier, vol. 34(3-4), pages 269-287, May.
    18. Sekkat, Khalid & Varoudakis, Aristomene, 2000. "Exchange rate management and manufactured exports in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 61(1), pages 237-253, February.
    19. Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 707-727.
    20. Richard Baldwin & Paul Krugman, 1989. "Persistent Trade Effects of Large Exchange Rate Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 635-654.
    21. Cushman, David O., 1983. "The effects of real exchange rate risk on international trade," Journal of International Economics, Elsevier, vol. 15(1-2), pages 45-63, August.
    22. Patrick Guillaumont & Sylviane Guillaumont Jeanneney & Aristomene Varoudakis, 1999. "Economic Policy Reform and Growth Prospects in Emerging African Economies," OECD Development Centre Working Papers 145, OECD Publishing.
    23. Elbadawi, Ibrahim A. & Soto, Raimundo, 1994. "Capital flows and long-term equilibrium real exchange rates in Chile," Policy Research Working Paper Series 1306, The World Bank.
    24. Patrick Honohan & Stephen A. O'Connell, 1997. "Contrasting Monetary Regimes in Africa," IMF Working Papers 97/64, International Monetary Fund.
    25. Grobar, Lisa Morris, 1993. "The effect of real exchange rate uncertainty on LDC manufactured exports," Journal of Development Economics, Elsevier, vol. 41(2), pages 367-376, August.
    26. Christian Bauer & Bernhard Herz, 2006. "Monetary and Exchange Rate Stability at the EU. Mediterranean Borders," Revue économique, Presses de Sciences-Po, vol. 57(4), pages 899-917.
    27. 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.
    28. Devarajan, Shantayanan, 1997. "Real Exchange Rate Misalignment in the CFA Zone," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(1), pages 35-53, March.
    29. Egert, Balazs & Drine, Imed & Lommatzsch, Kirsten & Rault, Christophe, 2003. "The Balassa-Samuelson effect in Central and Eastern Europe: myth or reality?," Journal of Comparative Economics, Elsevier, vol. 31(3), pages 552-572, September.
    30. Balassa, Bela, 1990. "Incentive policies and export performance in sub-Saharan Africa," World Development, Elsevier, vol. 18(3), pages 383-391, March.
    31. Ghura, Dhaneshwar & Grennes, Thomas J., 1993. "The real exchange rate and macroeconomic performance in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 42(1), pages 155-174, October.
    32. Aristomène Varoudakis & Thierry Latreille, 1997. "Les facteurs structurels de la compétitivité manufacturière. Une analyse en données de panel pour le Sénégal," Revue Économique, Programme National Persée, vol. 48(3), pages 471-480.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jingxian Zou & Yaqi Wang, 2017. "Undervaluation, Financial Development, and Economic Growth," Asian Development Review, MIT Press, vol. 34(1), pages 116-143, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:reapec:143427. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: http://edirc.repec.org/data/aelinnz.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.