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Are devaluations effective in inducing real depreciations in sub-Saharan Africa?

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  • W. A. Razzak

Abstract

The analysis of this paper, with pooled data for 20 countries in sub-Saharan Africa during 1971-1991, indicates that nominal devaluations are effective in inducing permanent depreciations in the real exchange rate (RER). A 10% nominal devaluation of the domestic currency (expressed in units per US dollar) translates into a real depreciation of 8.8 and 7.7% in the short and long run, respectively. It is also established that the RER appreciates with an increase in inflation tax. A policy implication of these results is that nominal devaluations are effective in keeping the RER close to a level that maintains external competitiveness, if accompanied by appropriate restrictive monetary and fiscal policies.

Suggested Citation

  • W. A. Razzak, 1995. "Are devaluations effective in inducing real depreciations in sub-Saharan Africa?," Applied Economics Letters, Taylor & Francis Journals, vol. 2(11), pages 437-439.
    • Handle: RePEc:taf:apeclt:v:2:y:1995:i:11:p:437-439
    DOI: 10.1080/135048595357014
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    1. Edwards, Sebastian, 1989. "Exchange Controls, Devaluations, and Real Exchange Rates: The Latin American Experience," Economic Development and Cultural Change, University of Chicago Press, vol. 37(3), pages 457-494, April.
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    4. Ghura, Dhaneshwar & Grennes, Thomas J., 1993. "The real exchange rate and macroeconomic performance in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 42(1), pages 155-174, October.
    5. Cottani, Joaquin A & Cavallo, Domingo F & Khan, M Shahbaz, 1990. "Real Exchange Rate Behavior and Economic Performance in LDCs," Economic Development and Cultural Change, University of Chicago Press, vol. 39(1), pages 61-76, October.
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    Cited by:

    1. Weshah Razzak, "undated". "In the Middle of the Heat The GCC Countries Between Rising Oil Prices and the Sliding Greenback," API-Working Paper Series 0801, Arab Planning Institute - Kuwait, Information Center.
    2. Weshah Razzak, "undated". "On the GCC Currency Union," API-Working Paper Series 0910, Arab Planning Institute - Kuwait, Information Center.

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