The Current Account and Real Exchange Rate Dynamics in African Countries

Ahmad Hassan Ahmad and Eric Pentecost

No 4/12, Department of Economics Working Papers from University of Bath, Department of Economics

Abstract: Persistent international current account imbalances and real exchange rate movements have become a permanent feature of the world economy. This paper, therefore, sets out to investigate the relationship between the real exchange rate and current account dynamics of eleven African countries, using data from 1980 to 2008, based on a stochastic Mundell-Fleming model in which shocks to real exchange rates and current account have been identified as permanent and temporary. Using a bi-variate structural VAR approach, the results are in consonant with the theoretical model, with permanent shocks having permanent and positive effects on both the current account and the real exchange rates. On the other hand, while temporary shocks have insignificant effects on the real exchange rates, they have very different effects on the current accounts of different countries.

Keywords: real exchange rates; current accounts; structural var (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-afr and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://purehost.bath.ac.uk/ws/files/9438926/current_account.pdf Final published version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eid:wpaper:32981

Access Statistics for this paper

More papers in Department of Economics Working Papers from University of Bath, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Scholarly Communications Librarian (openaccess@bath.ac.uk).