Asongu, Simplice and Nnanna, Joseph (2019): REER Imbalances and Macroeconomic Adjustments: evidence from the CEMAC zone. Published in: Foreign Trade Review , Vol. 55, No. 3 (March 2020): pp. 372-381.
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Abstract
The EMU crisis holds special lessons for existing monetary unions. We assess the behavior of real effective exchange rates (REERs) of members of the Central African Economic and Monetary Community (CEMAC) zone with respect to their long-term equilibrium paths. A reduced form of the fundamental equilibrium exchange rate (FEER) model is estimated and associated misalignments. Our findings suggest that for majority of countries, macroeconomic fundamentals have the expected associations with the exchange rate fluctuations. The analysis also reveals that only the REER adjustments of Cameroon and Gabon are significant in restoring the long-term equilibrium in event of a shock. The Cameroonian economic fundamentals of terms of trade, government expenditure and openness have different long-term relations with the REER in comparison to those of other member states. There is no need for an adjustment in the level of the peg based on the present quantitative analysis of REER paths.
Item Type: | MPRA Paper |
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Original Title: | REER Imbalances and Macroeconomic Adjustments: evidence from the CEMAC zone |
Language: | English |
Keywords: | Exchange rate; Macroeconomic impact; CEMAC zone |
Subjects: | F - International Economics > F3 - International Finance > F31 - Foreign Exchange F - International Economics > F3 - International Finance > F33 - International Monetary Arrangements and Institutions F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F42 - International Policy Coordination and Transmission F - International Economics > F6 - Economic Impacts of Globalization > F61 - Microeconomic Impacts O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa |
Item ID: | 101858 |
Depositing User: | Simplice Asongu |
Date Deposited: | 15 Jul 2020 13:05 |
Last Modified: | 15 Jul 2020 13:05 |
References: | Abdih, Y., & Tsangarides, C., (2010). “FEER for the CFA franc”, Applied Economics, 42, pp. 2009-2029. Ahlers, T., & Hinkle, L., (1999). “Estimating the equilibrium real exchange empirically” in Exchange Rate Misalignment: Concepts and Measurement for Developing Countries, (Eds) Hinkle, L., & Montiel, P., World Bank, Washington, pp. 293-358. Asongu, S. A., (2014a). “Are Proposed African Monetary Unions Optimal Currency Areas? Real, Monetary and Fiscal Policy Convergence Analysis”, African Journal of Economics and Management Studies, 5(1), pp. 9-29. Asongu, S. A., (2014b). “REER imbalances and macroeconomic adjustments in the proposed West African Monetary Union”. South African Journal of Economics. 82(2), pp. 276-289. Asongu, S. A., (2013). “Real and Monetary Policy Convergence: EMU Crisis to the CFA zone”, Journal of Financial Economic Policy, 5(1), pp. 20-38. Chen, R., Milesi-Ferretti, G. M., & Tressel, T., (2012). “External Imbalances in the Euro Area”, IMF Working Paper 12/236. Edwards, S., (1989). Real Exchange Rates, Devaluation and Adjustment: Exchange Rate Policy in Developing Countries, MIT Press, Cambridge, MA. Johansen, S., (1995). Likelihood-based Inference in Cointegrated Vector Autoregressive Models, Oxford University Press, United Kingdom. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/101858 |