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Effets de long terme du taux de change réel sur la balance commerciale nominale et réelle en zone Franc africaine
[Long-run effects of real exchange rate on the nominal and real trade balance in African Franc zone]

Author

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  • Chassem, Nacisse Palissy

Abstract

The purpose of this study is to determine the long-run effects of changes in real exchange rate on the nominal (in value) and real (in volume) trade balance for the countries of the African Franc zone. These countries together have a common currency: the CFA franc, whose parity with the euro is fixed. By applying the cointegration bounds testing approach of Pesaran et al. (2001) on annual data from 1970 to 2006, the study shows, for each of the countries studied, the existence of a long-run relationship between the real trade balance, the real national GDP, real world GDP and the real exchange rate. In addition, the study reverses the empirical validity of the Marshall-Lerner condition for almost all countries of the African Franc zone. On the contrary, the depreciation of the real exchange rate deteriorates the nominal trade balance of these countries. This result could be attributed to the value effect of the depreciation of the real exchange rate, but also to the contraction of the volume effect due to the low competitiveness of exports from these countries, coupled with the strong dependence of their economies in relation to imports of capital goods and equipment and certain consumer goods prized by the population. These last statements are confirmed by the effect on the real trade balance of the depreciation of the real exchange rate which is negative or null for at least 10 of the 14 countries of the African Franc zone.

Suggested Citation

  • Chassem, Nacisse Palissy, 2011. "Effets de long terme du taux de change réel sur la balance commerciale nominale et réelle en zone Franc africaine
    [Long-run effects of real exchange rate on the nominal and real trade balance in Af
    ," MPRA Paper 30252, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:30252
    as

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    File URL: https://mpra.ub.uni-muenchen.de/30252/1/MPRA_paper_30252.pdf
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    References listed on IDEAS

    as
    1. Kwalingana, Samson & Nkuna, Onelie, 2009. "The Determinants of Current Account Imbalances in Malawi," MPRA Paper 14694, University Library of Munich, Germany.
    2. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    3. repec:ebl:ecbull:v:5:y:2003:i:18:p:1-13 is not listed on IDEAS
    4. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    5. Mohsen Bahmani-Oskooee, 1998. "Cointegration Approach to Estimate the Long-Run Trade Elasticities in LDCs," International Economic Journal, Taylor & Francis Journals, vol. 12(3), pages 89-96.
    6. Boyd, Derick & Caporale, Gugielmo Maria & Smith, Ron, 2001. "Real Exchange Rate Effects on the Balance of Trade: Cointegration and the Marshall-Lerner Condition," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 187-200, July.
    7. Tuck Cheong Tang & Mahendhiran Nair, 2002. "A cointegration analysis of Malaysian import demand function: reassessment from the bounds test," Applied Economics Letters, Taylor & Francis Journals, vol. 9(5), pages 293-296.
    8. Drama, Bedi Guy Herve, 2010. "The Effects of Real Exchange Rate on Trade Balance in Cote d’Ivoire: Evidence from the Cointegration Analysis and Error-Correction Models," MPRA Paper 21810, University Library of Munich, Germany.
    9. Morel, Louis & Perron, Benoit, 2003. "Relation entre le taux de change et les exportations nettes : test de la condition Marshall-Lerner pour le Canada," L'Actualité Economique, Société Canadienne de Science Economique, vol. 79(4), pages 481-502, Décembre.
    10. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    11. Tang, Tuck Cheong, 2003. "Japanese aggregate import demand function: reassessment from the 'bounds' testing approach," Japan and the World Economy, Elsevier, vol. 15(4), pages 419-436, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    eal exchange rate; Trade balance; Marshall-Lerner condition; Bounds testing approach of cointegration; African Franc zone;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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