Démocratie et surévaluation du taux de change: le cas de Madagascar

Michael Goujon ()

Revue d’économie du développement, 2008, vol. 22, issue 3, pages 87-113

Abstract: This paper deals with the link between the level of democracy and the exchange rate overvaluation. Given the difficulty to identify such a relation in a cross country analysis, we consider a country case where the needed conditions to observe the relation are in place. Here we argue that, given the characteristics and the history of Madagascar, the dictatorship used the exchange rate overvaluation to ensure itself the urban sector support. The cointegration analysis between the variables shows that the level of democracy, measured by a freedom index from Freedom House, is one of the long term determinants of the change in the real exchange rate in 1972-2003. The low level of democracy in 1972-1987 can then explain the deep exchange rate overvaluation in this period.

Keywords: democracy; real exchange rate; urban bias; cointegration (search for similar items in EconPapers)
Date: 2008

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