Real Exchange Rate and Trade Balance Dynamics in Cote D’ivoire

Keho, Yaya

doi:10.32479/ijefi.10857

Cited by 7 publications

(6 citation statements)

References 37 publications

(50 reference statements)

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“…The opposite is also true, namely that a depreciation of the real exchange rate is a stimulating factor for exports. This confirms the work of Yaya (2021) for the Côte d’Ivoire according to which a depreciation of real exchange rate causes an improvement in the trade balance in a significant way both in the short and long run in this country. However, this is in contrast to the results of Lucy and al .…”

Section: Resultssupporting

confidence: 84%

Can national productions replace imports in West African countries? Estimation of the Marshall–Lerner–Robinson condition (MLRC)

Oloukoi

2023

AJEMS

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PurposeThis article examines if the national productions of West African Economic and Monetary Union (WAEMU) countries can be substituted for the imports by testing MLRC in these countries.Design/methodology/approachThe Mundell–Fleming model (MMF) is the analytical framework adopted in this paper with import demand and export supply functions estimation borrowed to Thirlwall (1979). This study covers four countries in West Africa from 1990 to 2021. The estimation procedure used is an Autoregressive Distributed Lag (ARDL) approach to cointegration.FindingsThe findings reveal that there is a strong marginal propensity to import in the WAEMU countries. The hypothesis of a non-significant price effect on imports in the short-term is confirmed for several countries while only Togo satisfies the MLRC in the short and long run.Originality/valueThis study presents several originalities: (1) it evaluates MLRC with a clear analytical framework; (2) unlike other studies, this article quantifies the MLRC from a theoretical, econometric and empirical point of view; (3) this article presents the results country by country in order to reveal heterogeneity between countries; (4) this study adds to the Marshall–Lerner condition for the derivation of Robinson by considering a situation where initially the trade balance is not in equilibrium.

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Section: Resultssupporting

confidence: 84%

Can national productions replace imports in West African countries? Estimation of the Marshall–Lerner–Robinson condition (MLRC)

Oloukoi

2023

AJEMS

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“…He found that foreign direct investment and trade openness have negative effects on the trade balance, whereas the exchange rate is insignificantly related to the trade balance. In a recent study, Keho (2021) found a positive effect of the real exchange rate depreciation and a negative effect of domestic income on the trade balance in Cote d'Ivoire.…”

Section: Literature Reviewmentioning

confidence: 94%

Determinants of Trade Balance in West African Economic and Monetary Union (WAEMU): Evidence from heterogeneous panel analysis

Keho

2021

Cogent Economics & Finance

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This study investigates the determinants of the trade balance in West African and Monetary Union (WAEMU) over the period 1975-2017. We employ the Mean Group (MG) estimator along with the grouped mean version of Dynamic OLS (DOLS) and Fully Modified OLS (FMOLS) to deal with both endogeneity and crosscountry heterogeneity. The results reveal that the trade balance is negatively related to domestic and foreign income whereas real effective exchange rate depreciation improves the trade balance in the long-run. However, the results do not confirm the short-run worsening of trade balance suggested by the J-curve. In the short-run, the trade balance is sensitive only to foreign real income but not to domestic income and real exchange rate. The country-level estimates show heterogeneity in the response of the trade balance to real exchange rate, domestic and foreign income. Overall, the findings of this study suggest that policies aimed at improving the trade balance should focus on the domestic production of imported goods, rather than devaluation.

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“…The evidence from this literature is mixed and conflicting. Some studies found that depreciation of real exchange rate has a significant improving effect on trade balance (Baharumshah, 2001;Bahmani-Oskooee, 2001;Boyd et al, 2001;Kale, 2001;Lal & Lowinger, 2002;Musila & Newark, 2003;Yol & Baharumshah, 2007;Igue & Ogunleye, 2014;Anning et al, 2015;Caporale et al, 2015;Ogbonna, 2016;Hunegnaw & Kim, 2017;Ousseini et al, 2017;Sokeng Dongfack & Ouyang, 2019;Yazgan & Ozturk, 2019;Keho, 2021a), while others reported that depreciation worsens trade balance (Onafowora, 2003;Adeniyi et al, 2011;Genemo, 2017). Still, others failed to establish any significant relationship between the two variables (Hatemi-J & Irandoust, 2015;Duasa, 2007;Loto, 2011;Akpansung & Babalola 2013;Shawa & Shen, 2013;Meniago & Eita, 2017;Kamugisha & Assoua, 2020).…”

Section: Introductionmentioning

confidence: 99%

Effects of Real Exchange Rate on Trade Balance in Cote d’Ivoire: Evidence from Threshold Nonlinear ARDL Model

Keho¹

2021

TEL

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The objective of this paper is to shed new light on the nonlinear relationship between real exchange rate changes and trade balance in Cote d'Ivoire. In examining this issue, previous studies have relied on the nonlinear autoregressive distributed lag model developed by Shin et al. (2014) where real exchange rate is decomposed into partial sum of positive and negative changes. They fail to examine the response of the trade balance to extreme changes in the real exchange rate. In order to investigate possible sign and size-dependence in the response of the trade balance to exchange rate, this study uses multiple threshold nonlinear ARDL modeling. The approach is implemented using annual data covering the period 1975-2017. The results reveal that the effects of changes in real exchange rate are asymmetric in both time horizons. More specifically, real exchange rate appreciations deteriorate the trade balance while real depreciations improve it. Further, the effect of large depreciations is higher when compared with large appreciations.

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Real Exchange Rate and Trade Balance Dynamics in Cote D’ivoire

Cited by 7 publications

References 37 publications

Can national productions replace imports in West African countries? Estimation of the Marshall–Lerner–Robinson condition (MLRC)

Can national productions replace imports in West African countries? Estimation of the Marshall–Lerner–Robinson condition (MLRC)

Determinants of Trade Balance in West African Economic and Monetary Union (WAEMU): Evidence from heterogeneous panel analysis

Effects of Real Exchange Rate on Trade Balance in Cote d’Ivoire: Evidence from Threshold Nonlinear ARDL Model

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