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Revisiting the nexus between currency misalignments and growth in the CFA Zone

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  • Carl Grekou

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper, we revisit the link between currency misalignments and economic growth by taking into account the foreign currency-denominated debt dynamics (except French Franc and euro) for the CFA zone countries over the period 1985-2011. Relying on a BEER approach and using panel cointegration techniques, we first derive currency misalignments. We then estimate a panel smooth transition growth equation that allows us to observe nonlinear impacts of misalignments on both economic growth and foreign currency-denominated debt dynamics. We find that the nonlinear impact of currency misalignments on growth through the competitiveness channel is mitigated by the foreign currency-denominated debt dynamics through a valuation effect.

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  • Carl Grekou, 2014. "Revisiting the nexus between currency misalignments and growth in the CFA Zone," Working Papers hal-04141364, HAL.
    • Handle: RePEc:hal:wpaper:hal-04141364
    Note: View the original document on HAL open archive server: https://hal.science/hal-04141364
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