Publications /
Research Paper

Back
Current Account Adjustments and Exchange Rate Arrangements: What Regime for African Countries?
Authors
Mohamed Obaidy
May 30, 2019

This paper empirically examines the impact of exchange rate arrangements on current account imbalances within the African context. Following Friedman’s hypothesis (Friedman, 1953), we test the propositions stating that flexible exchange rate regimes limit the magnitude of real external shocks and permit smoother adjustments of external imbalances. Using a new de facto exchange rate regime classification, we employ two empirical methodologies to test this hypothesis: we first apply an event study to identify current account reversal episodes and observe growth and real exchange rate behaviors across exchange rate arrangements. Second, we run an econometric model to estimate current account persistence and test to what extent it differs per exchange rate regime. Our sample comprises 48 African countries for the period 1980-2017. Our results confirm two propositions: (1) Current account imbalances are smaller and probably less costly in countries with a flexible exchange rate regime, and (2) flexible exchange arrangements permit faster current account adjustments.

RELATED CONTENT

  • Authors
    Inácio F. Araújo
    Fatna El Hattab
    Soulaimane Anis
    June 30, 2022
    Depuis l’année 2015, le Maroc a fait de la régionalisation avancée un choix stratégique pour concrétiser sa volonté politique de mettre en œuvre une approche de développement territorial plus intégrée. Cette initiative vise à assurer un développement territorial durable, robuste et inclusif mais aussi à capitaliser sur les potentialités de chaque région en termes de ressources. Ainsi, de nouvelles structures ont été mises en place pour moderniser les services publics et améliorer le ...
  • Authors
    Rishita Mehra
    June 24, 2022
    For today’s middle-income countries in Africa, innovation is essential to sustain growth and promote the transition to high-income status. This paper begins by providing an in-depth review of the region’s innovation performance during the last three decades. A distinction is made between residents and non-residents, and outcomes at different income levels. Using cross-country regressions, we then study the determinants of innovation and assess the impact of innovation on growth in t ...
  • Authors
    Moubarack Lo
    Mohamed Ben Omar NDIAYE
    June 15, 2022
    La question de la mise en œuvre du projet de monnaie unique de la CEDEAO a encore été au centre des discussions entre les chefs d’État de la CEDEAO lors de leur 57ème session ordinaire, tenue à Niamey le 7 septembre 2020, et lors de laquelle ils ont décidé pour diverses raisons un nouveau report à une date ultérieure, après ceux de 2003, 2005, 2009 et 2015. Les chefs d’État ont aussi évoqué l’élaboration d’une « nouvelle feuille de route », sans toutefois déterminer u ...
  • June 10, 2022
    The latest IMF projections indicate that global growth will be 4.4% in 2022 after 5.9% in 2021. These projections make us very optimistic for the future, but they certainly cannot heal th ...
  • June 7, 2022
    يعتبر التضخم مقياسا اقتصاديا يعنى بتطور الأسعار في أسواق السلع والخدمات كما انه يرصد القدرة الشرائيّة. وقد شهد معدل التضخم مؤخرا ارتفاعات غير مسبوقة في بقاع عدة، قارن بعض الخبراء الاقتصاديين بينها وبين مرحلة الركود التضخمي في سبعينيات القرن الماضي، اخذين كمنطلق مجموعة من الأحداث المتتال...
  • May 20, 2022
    Traders have worried that the war involving Russia and Ukraine could stoke inflation, further disrupt supply chains and derail the global economic recovery. Scarcity of food has led to ri ...
  • April 29, 2022
    Following on the heels of the COVID-19 pandemic and severe drought in North Africa, the Russian invasion of Ukraine – large exporters of food and, in the case of Russia, energy— may inflict increased hunger on the food insecure in Morocco – despite mitigating measures by the government. Morocco is so far successfully shielding its large poor and vulnerable population by subsidizing essential commodities. With memories of the violent protests during the 2007/08 food and fuel crisis s ...
  • Authors
    February 3, 2022
    COVID-19 has ravaged nearly every country in the world, with the globalization of recent decades intensifying its spread. As of mid-2021, the world had spent $16.5 trillion—18% of global GDP—to fight the disease. And that amount does not even include the most important losses such as deaths, mental health effects, restrictions on human freedom, and other nonmonetary suffering. Nearly 90% of this spending was by developed economies, with the rest by emerging market and developing eco ...
  • Authors
    December 21, 2021
    The Policy Center for The New South (PCNS) joined an inter-institutional effort between the Ibero-American General Secretariat (SEGIB), the United Nations Development Program (UNDP) and the International Development Research Centre (IDRC) in an international research project called ‘’Purpose-driven companies and the regulation of the Fourth Sector in Ibero-America’’. As this project grew to cover countries outside of Ibero-America, the PCNS was invited to write a chapter about the M ...