The asymmetric effects of exchange rate on trade balance and output growth

Ekundayo Mesagan, Olorunfemi Alimi and Xuan Vinh Vo

The Journal of Economic Asymmetries, 2022, vol. 26, issue C

Abstract: The study analyses the impact of exchange rate asymmetries on trade and output growth in 8 of the largest African countries between 1970 and 2019 using the non-linear autoregressive distributed lag (NARDL) framework. The empirical result confirms a long-run relationship between exchange rate, trade and output growth. Also, currency appreciation and depreciation enhance short-run trade and output in South Africa while reducing both in Angola. Regarding Egypt and Morocco, currency appreciation improves short-run trade and growth, but in the long run, depreciation lowers both. This is similar in Kenya and Nigeria, except for the weak negative effect of currency depreciation on trade. In general, for most African nations, both appreciation and depreciation primarily exert negative impacts on the long-run trade balance, while depreciation has mainly short-run positive effects. Similarly, depreciation positively impacts short-run growth, while currency appreciation remains largely negative. We then recommend policy prescriptions for the continent.

Keywords: Exchange rate; Trade; Output; NARDL; Africa (search for similar items in EconPapers)
JEL-codes: B17 C10 F31 F41 N17 O47 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:26:y:2022:i:c:s1703494922000329

DOI: 10.1016/j.jeca.2022.e00272

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