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Does Latin America Have More to Gain From Exchange Rate Liberalization than Sub-Saharan Africa?

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  • Armah Bartholomew

Abstract

An examination of the relationship between exchange rate liberalization and economic growth in selected Latin American and Sub-Saharan African countries reveals evidence of a short-run causal relationship between the two variables in both Latin America and Sub-Saharan Africa. Within each region, exchange rate liberalization causes growth in some countries while others exhibit reverse causality running from growth to exchange rate leads to increased growth and growth induces exchange rate liberalization in most Latin American countries, in the majority of Sub-Saharan African countries studied, exchange rate liberalization reduces growth while growth causes distortions in the exchange rate. Market imperfections, expansionary fiscal and monetary policies under a fixed exchange rate regime, and poor terms of trade are cited as possible explanations for the findings for Sub-Saharan Africa. [F, O]

Suggested Citation

  • Armah Bartholomew, 2000. "Does Latin America Have More to Gain From Exchange Rate Liberalization than Sub-Saharan Africa?," International Economic Journal, Taylor & Francis Journals, vol. 14(2), pages 113-132.
    • Handle: RePEc:taf:intecj:v:14:y:2000:i:2:p:113-132
    DOI: 10.1080/10168730000000021
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