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An empirical analysis on the determinants of the real exchange rate in African countries

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  • M. O. Odedokun

Abstract

The study employs annual data over 1970-90, pooled across 38 African countries, to examine the effects of a wide range of macroeconomic policies, devaluation and fundamentals on real exchange rate behaviour. Our findings suggest that the following appreciate real exchange rate: fiscal deficits; domestic credit growth; total domestic absorption-GDP ratio; public consumption-GDP ratio; private consumption-GDP ratio; terms of trade improvement arising from falling import prices (but not rising export prices); per capita income; and black market exchange rate premium. On the other hand, devaluation; investment-GDP ratio; consumer-wholesale price ratio in trading-partner countries; and economic boom or growth in industrial countries are found to depreciate real exchange rate.

Suggested Citation

  • M. O. Odedokun, 1997. "An empirical analysis on the determinants of the real exchange rate in African countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 6(1), pages 63-82.
    • Handle: RePEc:taf:jitecd:v:6:y:1997:i:1:p:63-82
    DOI: 10.1080/09638199700000005
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    References listed on IDEAS

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    1. Kiguel, Miguel A., 1992. "Exchange rate policy, the real exchange rate, and inflation : lessons from Latin America," Policy Research Working Paper Series 880, The World Bank.
    2. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821.
    3. Elbadawi, Ibrahim A., 1992. "Real overvaluation, terms of trade shocks, and the cost to agriculture in sub-Saharan Africa," Policy Research Working Paper Series 831, The World Bank.
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    Cited by:

    1. Ernesto R. Gantman & Marcelo P. Dabós, 2018. "Does trade openness influence the real effective exchange rate? New evidence from panel time-series," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 9(1), pages 91-113, March.
    2. M. A. Adebiyi & M. O. Abeng, 2019. "The Sensitivity of Sector Stock Returns to Exchange Rate Risks in Nigeria," Economic and Financial Review, Central Bank of Nigeria, vol. 57(2), June.
    3. Debabrata Bagchi & Georgios E. Chortareas & Stephen M. Miller, 2004. "The Real Exchange Rate in Small, Open, Developed Economies: Evidence from Cointegration Analysis," The Economic Record, The Economic Society of Australia, vol. 80(248), pages 76-88, March.
    4. Syed Ali Raza & Sahar Afshan, 2017. "Determinants of Exchange Rate in Pakistan: Revisited with Structural Break Testing," Global Business Review, International Management Institute, vol. 18(4), pages 825-848, August.

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