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Does the choice of an exchange rate regime limits exchange rate misalignments? The example of sub-Saharan African countries

BIKAI, J. Landry and OWOUNDI F., Ferdinand (2016): Does the choice of an exchange rate regime limits exchange rate misalignments? The example of sub-Saharan African countries.

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Abstract

This article examines the incidence of exchange rate regime on the real exchange rate misalignments in Sub-Saharan African countries. To this end, we compare misalignments of 17 countries classified into two groups according to the exchange rate regime. For the equilibrium real exchange rate determination, we rely on a NATREX-based approach which we compare to the behavioral model (BEER), to prove results consistency. Relying on annual data between 1980 and 2011, our estimates made simultaneously by the Pooled Mean Group method (PMG), the Dynamic OLS (DOLS) and the Fully Modified OLS (FMOLS) show that misalignments do not differ in average from one group to another. Put another way, no exchange rate regime is going to bail an economy out of deviations of its exchange rate.

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