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Cote d'Ivoire : competitiveness, Cocoa, and the real exchange rate

  • Bogetic, Zeljko
  • Espina, Carlos
  • Noer, John

This paper explores competitiveness of Cote d'Ivoire's economy over a long period of 1960-2003 and its link with cocoa prices. The main conclusions are as follows. First, using four measures of real effective exchange rate (REER) for the 1960-2002 period, we track the evolution of REER and conclude, inter alia, that until 2003, REER remained well below its 1994 level. Second, we find that based on our measure of the multilateral REER with dynamic weights, which covers most recorded trade, France no longer dominates Cote d'Ivoire's trade. Instead, Cote d'Ivoire has diversified its set of trading partners. Unfortunately, it has also specialized in one export product, raw cocoa. This paper aims to contribute to the question to what extent do cocoa prices affect Cote d'Ivoire's competitiveness in world trade? Third, the answer to this question is that cocoa prices are an important determinant of Cote d'Ivoire's competitiveness. Similar to the case of a classic"Dutch Disease,"increases in the real world price of a"natural resource"(i.e., cocoa) tend to result in the appreciation of the CFA franc and a loss in competitiveness. Econometric tests further confirm that 1994 was a"break-point"not only for growth and productivity (as documented in the two related papers) but also for trade competitiveness. Recent productivity per worker trends versus wages also seem to indicate slow growth in 1996-2000, without major improvement in competitiveness.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4416.

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Date of creation: 01 Nov 2007
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Handle: RePEc:wbk:wbrwps:4416
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  1. Ian W. Marsh & Stephen Tokarick, 1994. "Competitiveness Indicators; A Theoretical and Empirical Assessment," IMF Working Papers 94/29, International Monetary Fund.
  2. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
  3. Bogetic, Zeljko & Noer, John & Espina, Carlos, 2007. "Cote d'Ivoire : from success to failure a story of growth, specialization, and the terms of trade," Policy Research Working Paper Series 4414, The World Bank.
  4. Bogetic, Zeljko & Espina, Carlos & Noer, John, 2007. "Cote d'ivoire volatility, shocks and growth," Policy Research Working Paper Series 4415, The World Bank.
  5. Ratna Sahay & Luis Felipe Céspedes & Paul Cashin, 2002. "Keynes, Cocoa, and Copper; In Search of Commodity Currencies," IMF Working Papers 02/223, International Monetary Fund.
  6. Sebastian Edwards, 1989. "Real Exchange Rates in the Developing Countries: Concepts and Measure- ment," NBER Working Papers 2950, National Bureau of Economic Research, Inc.
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