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Exchange Rate Crisis among Inflation Targeting Countries in Sub-Saharan Africa

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  • Senanu Kwasi Klutse

    (Institute of Finance and International Economic Relations, University of Szeged, Kálvária sgt 1, 6722 Szeged, Hungary)

  • Judit Sági

    (Finance Department, Budapest Business School, University of Applied Sciences, Buzogány u. 10-12, 1149 Budapest, Hungary)

  • Gábor Dávid Kiss

    (Institute of Finance and International Economic Relations, University of Szeged, Kálvária sgt 1, 6722 Szeged, Hungary)

Abstract

The exchange market pressure index has proven to be a major indicator in identifying exchange rate crises in economies; however, due to the complexities surrounding developing economies, the efficacy of the index has been called to question. Specifically, the selection of an appropriate index and the problem of selecting the appropriate threshold for identifying exchange market pressure. To investigate this issue, this study identifies exchange rate crisis episodes in South Africa and Ghana using ridge regression, a discrete threshold regression, and Dynamic Ordinary Least Square (DOLS) models. The results are robust in resolving the problems with an exchange market pressure index. They also point to uneven implementation of the inflation targeting policy framework in the studied countries.

Suggested Citation

  • Senanu Kwasi Klutse & Judit Sági & Gábor Dávid Kiss, 2022. "Exchange Rate Crisis among Inflation Targeting Countries in Sub-Saharan Africa," Risks, MDPI, vol. 10(5), pages 1-13, May.
    • Handle: RePEc:gam:jrisks:v:10:y:2022:i:5:p:94-:d:808116
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