Revisiting the nexus between currency misalignments and growth in the CFA Zone

Carl Grekou

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Abstract: In this paper, we revisit the link between currency misalignments and economic growth by taking into account foreign currency-denominated debt dynamics for the CFA zone countries over the period 1985–2011. Relying on a BEER approach and using panel cointegration techniques, we first derive currency misalignments. We then estimate a panel smooth transition growth equation that allows currency misalignment to exert nonlinear impacts on both economic growth and foreign currency-denominated debt dynamics. We find that the nonlinear impact of currency misalignments on growth through the competitiveness channel is mitigated by the foreign currency-denominated debt dynamics through a valuation effect.

Date: 2015
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Citations: View citations in EconPapers (15)

Published in Economic Modelling, 2015, 45, pp.142-153. ⟨10.1016/j.econmod.2014.11.015⟩

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Journal Article: Revisiting the nexus between currency misalignments and growth in the CFA Zone (2015)
Working Paper: Revisiting the nexus between currency misalignments and growth in the CFA Zone (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01620178

DOI: 10.1016/j.econmod.2014.11.015

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