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The importance of the exchange rate regime in limiting current account imbalances in sub-Saharan African countries

Blaise Gnimassoun ()

No 2014-22, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: One of the major current concerns of economic policy in developing countries is the choice of the appropriate exchange rate regime to consolidate and accelerate the pace of economic growth. This paper aims to investigate whether the choice of a country’s exchange rate regime may affect current account imbalances for sub-Saharan African economies. To this end, we first use Bayesian model averaging (BMA) to address concerns about model uncertainty and identify the key determinants (fundamentals) of external balances. Then, estimating current account imbalances over the 1980-2012 period, we show that flexible exchange rate regimes are more effective in preventing such disequilibria. Consequently, candidates for membership of monetary unions should discuss widely the possible adjustment mechanisms before forming such unions; one potential measure being the sharing of external risks at regional level

Keywords: Current account imbalances; Exchange rate regime; Bayesian model averaging; Sub-Saharan Africa. (search for similar items in EconPapers)
JEL-codes: F32 F33 C11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-cba, nep-int, nep-mon and nep-opm
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

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Journal Article: The importance of the exchange rate regime in limiting current account imbalances in sub-Saharan African countries (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2014-22

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