Exchange Rate Crisis among Inflation Targeting Countries in Sub-Saharan Africa

Senanu Kwasi Klutse, Judit Sági and Gábor Dávid Kiss
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Senanu Kwasi Klutse: Institute of Finance and International Economic Relations, University of Szeged, Kálvária sgt 1, 6722 Szeged, Hungary
Judit Sági: Finance Department, Budapest Business School, University of Applied Sciences, Buzogány u. 10-12, 1149 Budapest, Hungary

Risks, 2022, vol. 10, issue 5, 1-13

Abstract: The exchange market pressure index has proven to be a major indicator in identifying exchange rate crises in economies; however, due to the complexities surrounding developing economies, the efficacy of the index has been called to question. Specifically, the selection of an appropriate index and the problem of selecting the appropriate threshold for identifying exchange market pressure. To investigate this issue, this study identifies exchange rate crisis episodes in South Africa and Ghana using ridge regression, a discrete threshold regression, and Dynamic Ordinary Least Square (DOLS) models. The results are robust in resolving the problems with an exchange market pressure index. They also point to uneven implementation of the inflation targeting policy framework in the studied countries.

Keywords: monetary policy; FX rate regimes; Sub-Saharan Africa; exchange market pressure index (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2022
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