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Anchor currency and real exchange rate dynamics in the CFA Franc zone

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  • Couharde, Cécile
  • Coulibaly, Issiaka
  • Damette, Olivier

Abstract

Currency misalignments have been one of the focal points of interest in the literature devoted to the CFA Franc zone. Less attention has been paid, however, to the convergence process of real exchange rates towards equilibrium. In this paper, we analyze the short-run dynamics of real exchange rates of the CFA Franc zone countries and the role played by the anchor currency in their adjustment process. After controlling for the effects of the 1994 devaluation, we find the relationship between real exchange rates of the CFA Franc zone countries and of the euro to be substantial in size and subject to nonlinear effects.

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  • Couharde, Cécile & Coulibaly, Issiaka & Damette, Olivier, 2013. "Anchor currency and real exchange rate dynamics in the CFA Franc zone," Economic Modelling, Elsevier, vol. 33(C), pages 722-732.
    • Handle: RePEc:eee:ecmode:v:33:y:2013:i:c:p:722-732
    DOI: 10.1016/j.econmod.2013.05.005
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    4. Edouard Mien, 2020. "External and Internal Real Exchange Rates and the Dutch Disease in Africa: Evidence from a Panel of Nine Oil-Exporting Countries," CERDI Working papers hal-03013571, HAL.
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    6. DEGUENONVO, Cédric, 2017. "Real exchange rate misalignment in Senegal: effect on growth," MPRA Paper 84338, University Library of Munich, Germany.
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    8. Alexandre Henry, 2019. "Monetary Union, Competitiveness and Raw Commodity Dependence: Insights from Africa," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(2), pages 285-301, June.
    9. Daniel Simons & Rosmy Jean Louis, 2018. "Monetary union in West Africa and business cycles synchronicity: New evidence," The World Economy, Wiley Blackwell, vol. 41(10), pages 2828-2848, October.
    10. Andrea Salazar-Díaz & Aarón Levi Garavito-Acosta & Sergio Restrepo Ángel & Leidy Viviana Arcila-Agudelo, 2023. "Real Equilibrium Exchange Rate in Colombia: Thousands of VEC Models Approach," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 99, pages 33-78, July-Dece.
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    More about this item

    Keywords

    CFA zone; Misalignments; Panel smooth transition model;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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