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Revisiting the nexus between currency misalignments and growth in the CFA Zone

Listed author(s):
  • Carl Grekou

In this paper, we revisit the link between currency misalignments and economic growth by taking into account the foreign currency-denominated debt dynamics (except French Franc and euro) for the CFA zone countries over the period 1985-2011. Relying on a BEER approach and using panel cointegration techniques, we first derive currency misalignments. We then estimate a panel smooth transition growth equation that allows us to observe nonlinear impacts of misalignments on both economic growth and foreign currency-denominated debt dynamics. We find that the nonlinear impact of currency misalignments on growth through the competitiveness channel is mitigated by the foreign currency-denominated debt dynamics through a valuation effect.

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File URL: http://economix.fr/pdf/dt/2014/WP_EcoX_2014-04.pdf
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Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2014-4.

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Length: 36 pages
Date of creation: 2014
Handle: RePEc:drm:wpaper:2014-4
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