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The Relationship Between the Foreign Exchange Regime and Macroeconomic Performance in Eastern Africa

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  • Janet Gale Stotsky
  • Manuk Ghazanchyan
  • Olumuyiwa S Adedeji
  • Nils Øyvind Mæhle

Abstract

This study examines the relationship between the foreign exchange regime and macroeconomic performance in Eastern Africa. The study focuses on seven countries, five of which decisively liberalized their foreign exchange regimes. The study assesses the relationship between (i) growth and various determinants, including the exchange regime, the real exchange rate, and current account liberalization; and (ii) inflation and various determinants, including lagged inflation, the nominal exchange rate, the exchange regime, and liberalization. We find that in our sample, for the determinants of growth, investment and the real exchange rate are significant determinants but not the exchange regime or liberalization; and for inflation, the lagged inflation rate, nominal exchange rate, and the de facto regime are significant. Exchange rate pass-through is limited.

Suggested Citation

  • Janet Gale Stotsky & Manuk Ghazanchyan & Olumuyiwa S Adedeji & Nils Øyvind Mæhle, 2012. "The Relationship Between the Foreign Exchange Regime and Macroeconomic Performance in Eastern Africa," IMF Working Papers 12/148, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:12/148
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    Cited by:

    1. Jaroslava Durčáková & Ondřej Šíma, 2013. "BRICS: Exchange Rate policy in Context of Internal and External Equilibrium," Český finanční a účetní časopis, University of Economics, Prague, vol. 2013(4), pages 7-29.
    2. Emmanuel Olusegun STOBER, 2016. "Crude Oil Price Shocks And Macroeconomic Behavior In Nigeria," Journal of Social and Economic Statistics, Bucharest University of Economic Studies, vol. 5(1), pages 56-66, JULY.
    3. KANTA TANNIYOM & Paponpat Taveeapiradeecharoen & Prapatchon Jariyapan, 2015. "Modeling Dependency and Conditional Volatility between Asian Economic Community (AEC) Country Exchange Rate and Inflation Using the Copula-GARCH Model," Proceedings of International Academic Conferences 2704733, International Institute of Social and Economic Sciences.

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