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Current account balance and exchange rate adjustment in New Caledonia

Author

Listed:
  • Florence Huart

    (University Lille 1)

  • Gaël Lagadec

    (University of New Caledonia)

Abstract

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.

Suggested Citation

  • Florence Huart & Gaël Lagadec, 2013. "Current account balance and exchange rate adjustment in New Caledonia," Economics Bulletin, AccessEcon, vol. 33(1), pages 113-125.
    • Handle: RePEc:ebl:ecbull:eb-12-00423
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    References listed on IDEAS

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    1. Mr. Stephen Tokarick, 2010. "A Method for Calculating Export Supply and Import Demand Elasticities," IMF Working Papers 2010/180, International Monetary Fund.
    2. Williamson, John, 1993. "Exchange Rate Management," Economic Journal, Royal Economic Society, vol. 103(416), pages 188-197, January.
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    4. Égert, Balázs, 2004. "Assessing equilibrium exchange rates in CEE acceding countries: can we have DEER with BEER without FEER? A critical survey of the literature," BOFIT Discussion Papers 1/2004, Bank of Finland Institute for Emerging Economies (BOFIT).
    5. Krugman, Paul, 1989. "Differences in income elasticities and trends in real exchange rates," European Economic Review, Elsevier, vol. 33(5), pages 1031-1046, May.
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    Cited by:

    1. Gaël Ladagec & Jéremy Ellero & Etienne Farvaque, 2016. "Quelle insertion économique régionale pour les territoires français du Pacifique ?," Post-Print hal-04745588, HAL.

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    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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