Current account balance and exchange rate adjustment in New Caledonia
New Caledonia has a structural trade deficit. Public transfers from the French State amount to a large part of credits in the current account balance. The local currency, the franc XPF, has had a fixed parity against the euro since 1999. In prospect of independence, which would imply a loss (or decrease) of transfers received from metropolitan France, we evaluate what would be the required adjustment in the F.XPF/euro exchange rate in order to prevent the current account balance from worsening. Results mainly depend on the evolution of the price of nickel.
Volume (Year): 33 (2013)
Issue (Month): 1 ()
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References listed on IDEAS
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"Differences In Income Elasticities and Trends in Real Exchange Rates,"
NBER Working Papers
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