An econometric analysis of economic policy uncertainty and exchange market pressure of the three largest economies in West Africa

Terver Kumeka, Olabusuyi R. Falayi, Adeniyi J. Adedokun and Francis O. Adeyemi
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Olabusuyi R. Falayi: Dominican University
Adeniyi J. Adedokun: Dominican University
Francis O. Adeyemi: Dominican University

SN Business & Economics, 2022, vol. 2, issue 11, 1-33

Abstract: Abstract The present study conducts an econometric analysis of economic policy uncertainty (EPU) and exchange market pressure (EMP) of the three largest economies in West Africa using the Quantile regression econometric technique, and monthly data from 1996 to 2019. Contrary to previous studies, we evaluate this relationship across different market conditions. The study also accounts for heterogeneity among the West African countries; thus, country-specific analyses on Nigeria, Cote d’Ivoire and Ghana are carried out. Findings from country-specific study show some conflicting and conforming results. For panel analysis, results indicate that global EPU has strong positive influence on EMP for all quantiles. The effect reduces the pressure in the foreign exchange rate market at the bearish and bullish markets conditions, but intensifies the pressure for the intermediate and harshly declining market conditions. Conversely, domestic EPU also has a strong significant influence on EMP for all the quantiles, it intensifies the foreign exchange market pressure for the bearish, intermediate and bullish market conditions. The implications from our findings is that policymakers should on one hand pay attention to domestic EPU, and on the other hand, develop ways to ameliorate the effect of global EPU so as to adequately suppress the pressure on foreign exchange market.

Keywords: Exchange market pressure; Economic policy uncertainty; Quantile regression; West Africa; C21; D81; F31 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s43546-022-00350-y

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