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Real exchange rate and competitiveness of an EU's ultra-peripheral region: La Reunion Island

Author

Listed:
  • Fabien Candau

    (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)

  • Michaël Goujon

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

  • Jean-François Hoarau

    (CEMOI - Centre d'Économie et de Management de l'Océan Indien - UR - Université de La Réunion)

  • Serge Rey

    (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)

Abstract

This article aims at analyzing the problem of real exchange rate appreciation and competitiveness in the EU's ultra-peripheral regions by the case study of La Reunion Island. After describing economic characteristics of this French overseas department, such as the large deficit of the trade balance, this article looks for explanation by calculating and examining the statistical properties of the real effective exchange rate (REER). Our results show that this rate is stationary around a trend and provides evidence of (i) an appreciation of the REER, but (ii) no permanent overvaluation of the currency. These two results can be explained by the economic catch-up of La Reunion characterized by gains in relative productivity, and by the dynamics of the terms of trade and a permanent increase in the transfers from metropolis.

Suggested Citation

  • Fabien Candau & Michaël Goujon & Jean-François Hoarau & Serge Rey, 2013. "Real exchange rate and competitiveness of an EU's ultra-peripheral region: La Reunion Island," Post-Print halshs-00933602, HAL.
    • Handle: RePEc:hal:journl:halshs-00933602
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    Cited by:

    1. Fabien Candau & Serge Rey, 2014. "International Trade in Outermost Europe: A Comparative Analysis of Mayotte Island and French Overseas Departments," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 11(1), pages 123-146, June.
    2. Florent DEISTING & Serge REY, 2015. "Determinants Of Tourism In French Overseas Departments And Collectivities," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 42, pages 215-230.
    3. Florent DEISTING & Serge REY, 2015. "Determinants Of Tourism In French Overseas Departments And Collectivities," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 42, pages 215-230.
    4. Mien, Edouard, 2021. "External and internal exchange rates and the Dutch disease: Evidence from a panel of oil-exporting African countries," International Economics, Elsevier, vol. 167(C), pages 206-228.

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    Keywords

    cerdi;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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