Determinants of West African Monetary Zone (WAMZ)countries global export trade: do foreign reserves and independent exchange rates matter?
This study examines the effect of independent exchange rate pursuits and reserve holdings, relative to other determinants, on global export performance of WAMZ countries. The regression results show that exports originating from the Zone to the rest of the world are influenced positively by domestic output, export prices and exchange rate devaluations, but negatively by import price and economic performance of the major global trading partner, proxied by the US GDP. This result is not universal as the Gambia, Ghana and Guinea total exports functions show that exchange rate policy penalized exports contrary to the Nigerian case in which the coefficient estimate is significant and positive. The study infers that these results are consistent with theoretical expectation given the ironical divergence in export basket. Although they are all primary commodity exporters, Nigeria’s exports is mainly crude oil, and a priori expectation is that rapid economic growth or booms in the US should lead to increased demand for energy (healthy competitions). In conclusion, the study infers that since independent flexible exchange rate policy pursuits and reserve holdings makes no difference to the Zonal export performance ex ante, but have great potential for global exports collectively, they could explore an OCA to enhance both intra- and global inter-regional export trade
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