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Trade-Exchange Rate Nexus in Sub-Saharan African Countries

Author

Listed:
  • Philip O. Alege
  • Evans S. Osabuohien

Abstract

This study explores international trade–exchange rate interaction in sub-Saharan African (SSA) countries. Based on partial equilibrium analysis, we develop two equations for export and import in which exchange rate, real gross domestic product (GDP), stock of capital and technology are the independent variables. The results from empirical analyses show that export and import are inelastic to changes in exchange rate. It follows that depreciation of currencies in the region may not have the expected results in view of the structure of the economies and export compositions. In the same vein, depreciation would not depress imports but only aggravate balance of payments. Thus, in the light of the findings, a policy of exchange rate stability that hinges on long-run considerations, capital accumulation and technological capacity as well as the maintenance of comprehensive coherent macroeconomic packages remains a critical factor in ensuring that exchange rate policy performs its central role as a trade facilitation tool.

Suggested Citation

  • Philip O. Alege & Evans S. Osabuohien, 2015. "Trade-Exchange Rate Nexus in Sub-Saharan African Countries," Foreign Trade Review, , vol. 50(3), pages 151-167, August.
    • Handle: RePEc:sae:fortra:v:50:y:2015:i:3:p:151-167
    DOI: 10.1177/0015732515589440
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    References listed on IDEAS

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    Cited by:

    1. Uchechukwu E. Okorie & Evans S. Osabuohien & Hassan E. Oaikhenan, 2020. "Electricity Consumption, Public Agricultural Expenditure and Output in Nigeria: A Time Series Dynamic Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 10(2), pages 113-123.
    2. Yaya KEHO, 2021. "Real Exchange Rate Dynamics and Trade Balance in WAEMU Countries: Evidence from Panel Nonlinear ARDL Approach," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 5(2), pages 1-22.
    3. Yaya KEHO, 2021. "Asymmetric Effects of Real Exchange Rate on Trade Balance in Cote d’Ivoire: Evidence from Nonlinear ARDL Approach," Applied Economics and Finance, Redfame publishing, vol. 8(3), pages 9-21, May.
    4. Oluwatoyin A. Matthew & Tamunotonye Miebaka-Ogan & Olabisi Popoola & Tomike Olawande & Romanus Osabohien & Ese Urhie & Oluwasogo Adediran & Toun Ogunbiyi, 2019. "Electricity Consumption, Government Expenditure and Sustainable Development in Nigeria: A Co-integration Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 9(4), pages 74-80.
    5. Kwame Akosah, Nana & Omane-Adjepong, Maurice, 2017. "Exchange Rate and External Trade Flows: Empirical Evidence of J-Curve Effect in Ghana," MPRA Paper 86640, University Library of Munich, Germany, revised Dec 2017.
    6. Mukesh Kumar & Azeema Begam & Nargis, 2020. "The Impact of Currency Depreciation on Exports of SAARC Countries," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 8(1), pages 16-29, March.
    7. Joseph Chukwudi Odionye & Jude Okechukwu Chukwu, 2021. "The Asymmetric Effects Of Currency Devaluation In Selected Sub-Saharan Africa," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 66(230), pages 135-156, July – Se.
    8. Christelle Meniago & Joel Hinaunye Eita, 2017. "The effects of exchange rate changes on Sub-Saharan Africa trade," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 9(3), pages 213-230.
    9. Oluwatoyin A. Matthew & Christian U. Ede & Romanus Osabohien & Jeremiah Ejemeyovwi & Fagbeminiyi F. Fasina & Doris Akinpelumi, 2018. "Electricity Consumption and Human Capital Development in Nigeria: Exploring the Implications for Economic Growth," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 8-15.
    10. Abubakar Lawan Ngoma & Normaz Wana Ismail & Zulkornain Yusop, 2016. "An Analysis of Real Oil Prices and Real Exchange Rates in Five African Countries," Foreign Trade Review, , vol. 51(2), pages 162-179, May.

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    More about this item

    Keywords

    Cointegration; depreciation; exchange rate; exports; imports; panel data; sub-Saharan Africa; trade;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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