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Exchange Rate Scenarios, Export Dynamics, and GDP Responses: A Counterfactual Panel Structural VAR Analysis for WAMZ Countries

Author

Listed:
  • Richard Umeokwobi

    (Central Bank of Nigeria)

Abstract

Regional monetary integration is seen as a way to enhance trade and growth. This study examines the dynamic interactions among exchange rate unification, exports, and economic growth in West African Monetary Zone (WAMZ) countries using a Panel Structural Vector Auto regression (PSVAR) framework. The model captures both temporal and cross-country dynamics, tolerating the identification of structural shocks and their transmission mechanisms. Three scenarios are considered: a baseline flexible exchange rate regime, an appreciation unification, and a depreciation unification. The baseline flexible regime provided the most stable macroeconomic balance, a sustainable growth path, and minimum welfare losses. The appreciation scenario led to export contraction and income volatility, while the depreciation scenario improved long-run competitiveness but caused short-term instability. The stability test confirmed the model’s dynamic soundness, as shocks dissipated over time. The findings suggest that flexible exchange rate management supported by credible macroeconomic policies enhances export competitiveness, sustains GDP growth, and promotes long-term stability in the WAMZ region.

Suggested Citation

  • Richard Umeokwobi, 2025. "Exchange Rate Scenarios, Export Dynamics, and GDP Responses: A Counterfactual Panel Structural VAR Analysis for WAMZ Countries," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 11(2), pages 79-93, December.
    • Handle: RePEc:ana:journl:v:11:y:2025:i:2:p:79-93
    DOI: 10.22440/wjae.11.2.2
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    Keywords

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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