Effects of Exchange Rate Volatility on Trade in Some Selected Sub-Saharan African Countries
- 1
- 2
- 3
Abstract
The paper investigates the impact of exchange rate volatility on trade in 40 selected sub-Saharan African countries for the period 1986-2005. The study employs a gravity model with pooled ordinary least square (POLS) allowing for fixed effect and panel Generalized Method of Moments (GMM) techniques. The results of the analysis show that the net effect of exchange rate volatility on aggregate trade was positive using the two approaches. In the way the results show that there is not much difference between the impact of exchange rate volatility on primary and manufactured trade as well as between ECOWAS and non-ECOWAS countries. However, the results should be interpreted with caution as the history of exchange rate volatility is still relatively young compared with the developed countries.
- G. O. Akpokodje, “Exchange Rate Volatility and External Trade Performance of Selected African Countries, 1973-2003,” A Ph. D Thesis Submitted to University of Ibadan, Nigeria, 2007.
- O. Ogun, “Real Exchange Rate Movements Export Growth in Nigeria, 1960-1990,” AERC Research Paper 82, Nairobi, 1998.
- D. Ghura and T. Grennes, “The Real Exchange Rate and Macroeconomic Performance in Sub-Saharan Africa,” Journal of Development Economic, Vol. 42, No. 2, 1993, pp. 155-174. doi:10.1016/0304-3878(93)90077-Z
- A. Subramanian, “The Mauritian Success Story and its Lessons,” Wider Research Paper 2009/36, UNU-WIDER, Helsinki, 2009.
- I. Bah and H. A. Amusa, “Real Exchange Rate Volatility and Foreign Trade: Evidence from South Africa’s Export to the United States,” The African Finance Journal, Vol. 5, No. 2, 2003, pp. 1-20.
- World Bank, “World Development Indicators,” World Bank, Washinton DC, 2006.
- E. Helpman, “Imperfect Competition and Inter National Trade: Evidence from Fourteen Indus Trial Countries,” In: M. Spence and H. Hazard, Eds., International Competitiveness, Cambridge, Ballinger, 1987. pp. 197-220.
- M. D. Mckenzie, “The Impact of Exchange Rate Volatility on International Trade Flows,” Journal of Economic Surveys, Vol. 13, No. 1, 1999, pp. 71-106. doi:10.1111/1467-6419.00075
- R. Anderton and F. Skudelny, “Exchange Rate Volatility and Euro Area Imports,” European Central Bank Working Paper No. 64, 2001.
- N. S. Ndung’u, “Liberalization of the Foreign Exchange Market and Short Term Capital Flows Problem,” AERC Research Paper 109, Nairobi, 2001.
- D.O. Yinusa, “Exchange Rate Variability, Currency Substitution and Monetary Policy in Nigeria (1986-2001),” An Unpublished Ph.D Thesis, Depart Economics, Obafemi Awolowo University, Ile-Ife, Nigeria, 2005.
- A. Asseery and D. A. Peel, “The Effect of Exchange Rate Volatility on Export-Some New Estimates,” Economic Letters, Vol. 37, 1991, pp. 173-177. doi:10.1016/0165-1765(91)90127-7
- M. Arellano and S. R. Bond, “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,” Review of Economic Studies, Vol. 58, No. 2, 1991, pp. 277-297. doi:10.2307/2297968
- J. D. Sargan, “The Estimation of Economic Relationships Using Instrumental Variables,” Econometrica, Vol. 26, No. 3, 1958, pp. 393-415. doi:10.2307/1907619