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Exchange rate misalignments and the external balance under a pegged currency system

Author

Listed:
  • Blaise Gnimassoun

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper analyzes the link between the exchange rate misalignments and the external balance under a pegged currency system focusing on the former French colonies of Africa (the CFA zone). Having discussed and chosen an appropriate analytical framework, it addresses the issue of model uncertainty regarding the equilibrium exchange rate model before estimating currency misalignments. The results show that misalignments have a negative and asymmetric impact on the current account. While overvaluation of the CFA franc deteriorates the current account, undervaluation does not improve it. Finally, our results highlight that the export concentration tends to exacerbate the overall negative impact of currency misalignments.

Suggested Citation

  • Blaise Gnimassoun, 2017. "Exchange rate misalignments and the external balance under a pegged currency system," Post-Print hal-01665005, HAL.
    • Handle: RePEc:hal:journl:hal-01665005
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    Cited by:

    1. Prabheesh, K.P. & Prakash, Branesh & Vuniivi, Viliame, 2023. "Assessment of Fiji’s exchange rate," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1282-1305.
    2. Balli, Esra & Nazif Çatık, Abdurrahman & Nugent, Jeffrey B., 2021. "Time-varying impact of oil shocks on trade balances: Evidence using the TVP-VAR model," Energy, Elsevier, vol. 217(C).
    3. Tii N. Nchofoung & Elvis Dze Achuo & Linda Julie Tiague Zanfack, 2023. "Exchange rate misalignment and revenue mobilisation: a global comparative evidence of trade openness thresholds," Indian Economic Review, Springer, vol. 58(2), pages 281-310, December.
    4. Ferdinand Owoundi & Jacques Landry Bikai, 2021. "On the neutrality of the exchange rate regime regarding real misalignments: Evidence from sub‐Saharan Africa," Bulletin of Economic Research, Wiley Blackwell, vol. 73(3), pages 327-345, July.
    5. Yin-Wong Cheung & Sven Steinkamp & Frank Westermann, 2020. "A Tale of Two Surplus Countries: China and Germany," Open Economies Review, Springer, vol. 31(1), pages 131-158, February.
    6. Menna Bizuneh & Steven Buigut & Neven Valev, 2020. "Beyond Borders: The Euro Crisis and Public Support for Monetary Integration in East Africa," South African Journal of Economics, Economic Society of South Africa, vol. 88(4), pages 518-535, December.
    7. Tii N. Nchofoung & Nathanael Ojong & Ladifatou Ndi Gbambie Gachili, 2025. "Exchange rate misalignment and financial development in Africa," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 552-569, January.

    More about this item

    Keywords

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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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