Real Exchange Rate Volatility and Export Performance in the West African Monetary Zone (WAMZ)

Tarawalie, Abu Bakarr; Ahortor, Christian R.K.; Umo, Marshall

doi:10.1007/978-3-319-01282-7_5

Cited by 8 publications

(12 citation statements)

References 25 publications

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“…The null hypothesis of the augmented Dickey–Fuller (ADF) and Phillips–Perron (PP) tests is that the series is non‐stationary while the null hypothesis of the Kwiatkowski‐Phillips‐Schmidt‐Shin (KPSS) test is that the variable is stationary. The ADF unit root test has weak power in rejecting the null hypothesis of no stationarity which is why the KPSS unit root test is elaborated to bring perfection to the ADF unit root test (Tarawalie, Sissoho, Conte, & Ahortor, 2012). The results of the unit root tests, which indicate that all the variables are stationary after first difference, are shown in Table 4.…”

Section: Resultsmentioning

confidence: 99%

Is there a nexus between China outward foreign direct investment and welfare in Côte dʼIvoire? Empirical evidence from the Toda–Yamamoto procedure

Allou

Adeleye

Cheng

et al. 2020

African Development Review

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Foreign direct investment (FDI) plays an important role in the socioeconomic advancement of developing countries. In the last decade, FDI inflows from China into Côte dʼIvoire have grown rapidly. Using quarterly time series data from 2003Q1 to 2017Q4, this study probes if China FDI has any significant welfare impact on the citizens of Côte dʼIvoire vis-à-vis if a causal relationship exists. The policy outcome is to stimulate further discourse that will reduce poverty and enhance the living standard of the population. The study uses vector autoregressive (VAR) and the Toda and Yamamoto (1995) modification of the non-Granger causality test to determine if a causal relationship exists and the direction of causality. The empirical analysis provides evidence of a unidirectional causality from China FDI to social welfare (proxied by the human development index [HDI]) but no indication of causality between China FDI to economic welfare (proxied by real gross domestic product per capita [GDPPC]). This study, which is borne out of empirical curiosity, fills a lacuna in the FDI literature. To the best of our knowledge, this paper is a novel contribution that examines the FDI-welfare nexus between China and a developing economy like Côte dʼIvoire. Thus, policies that will further stimulate FDI inflows from China must be carefully crafted to attract funding to the most productive sectors of the economy in order to improve both social and economic welfare. By extension, the policies may be adapted by developing economies with similar characteristics to Côte dʼIvoire. 1 | INTRODUCTION The "One Belt and One Road" initiative of the Chinese government allows Chinese firms to invest in Africa with a view to promoting a "win-win and multi-win cooperation" in host countries in the form of foreign direct investment (FDI). This ingenuity made Africa one of the main economic and commercial partners of China in the Sino-Afro cooperation (Yanxia & Meibo, 2015). For a successful implementation, the Chinese governmentthrough the Forum on China-Africa Cooperation (FOCAC)-implemented strategies to help African countries

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Section: Resultsmentioning

confidence: 99%

Is there a nexus between China outward foreign direct investment and welfare in Côte dʼIvoire? Empirical evidence from the Toda–Yamamoto procedure

Allou

Adeleye

Cheng

et al. 2020

African Development Review

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“…Which will subsequently lead to higher export and lower imports if the Marshall-Lerner condition is satisfied 3 (Tarawalie et al, 2012;Jiang, 2014;Siklar and Kecili, 2018). Furthermore, the effect of the exchange rate movement on imports and exports also depends on the global economy.…”

Section: Impact Of Exchange Rate Movement On Import Export and Tradementioning

confidence: 99%

“…Clark et al (2004), on a similar note, asserts that the crisis in emerging markets, which have become more frequent in the last two decades, is especially notable cases of large exchange rate volatility. Correspondingly, Tarawalie et al (2012) submit that, although the market-determined exchange rate was instrumental in the economic revival experience of most African economies in the 1980s and 1990s, it has also led to an upsurge in exchange rate fluctuations. Again, Tarawalie et al (2012) maintained that following the introduction of the Structural Adjustment Program (SAP), and the adoption of the floating exchange rate system, sharp currency depreciation in most of the West African Monetary Zone WAMZ countries causes an increase in the general price levels and a reduction in output growth.…”

Section: Introductionmentioning

confidence: 99%

“…Correspondingly, Tarawalie et al (2012) submit that, although the market-determined exchange rate was instrumental in the economic revival experience of most African economies in the 1980s and 1990s, it has also led to an upsurge in exchange rate fluctuations. Again, Tarawalie et al (2012) maintained that following the introduction of the Structural Adjustment Program (SAP), and the adoption of the floating exchange rate system, sharp currency depreciation in most of the West African Monetary Zone WAMZ countries causes an increase in the general price levels and a reduction in output growth. Fatum et al (2018), opined that the slow growth rate in the aftermath of the global financial crisis GFC has prompted several countries to pursue economic policies that could depreciate the relative values of their respective currencies.…”

Section: Introductionmentioning

confidence: 99%

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Effects of Exchange Rate Volatility on Trade: Evidence from West Africa

Fofanah¹

2020

JEBS

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The objective of this paper has been to investigate the impact of exchange rate volatility on trade in the context of exports, imports, and the trade balance in West Africa. Applying the pooled Ordinary Least Square, the fixed effects, and the random effect models, and obtaining robust estimates for export and trade balance models by employing xtgls, panels (correlated) Corr (ar1), and adopting xtscc, fe regression with Driscoll-Kraay standard error to estimate the import model. The empirical results show that the impact of exchange rate volatility on exports and imports is insignificant. However, the result of the trade balance model shows a positive and significant link between exchange rate volatility and the trade balance. Thus, suggesting that traders tend to engage more in export activities with an increase in exchange rate volatility. Also, the analysis suggests that depreciation of the real exchange rate will lead to a decrease in exports. Thereby, confirming the limited production capability and heavy reliance on imported goods and services. Hence, this study recommends diversification of production activities and adopting strategies aiming at reducing dependence on imported goods and services. The empirical result shows a positive association between an increase in domestic economic activities of trading partners and exports of the West African countries. This implies that West African countries must engage in trade with countries that have a high economic growth rate. The result also shows a positive link between inflation rate and imports. This suggests the implementation of effective monetary policies geared towards controlling inflation.

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“…In contrast, the prices of domestic goods paid by foreigners go up, which tends to decrease foreign demand for domestic products (Fofanah, 2020a). Thus, the exchange rate appreciation tends to reduce exports, and if there is no corresponding change in the relative prices in the rest of the world, the appreciation of the exchange rate would represent a decrease of the country's competitiveness in the international market (Tarawalie et al 2012;Jiang 2014). The reduction in competitiveness may negatively impact on the trade balance, which might subsequently reduce the GDP growth rate.…”

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confidence: 99%

Effects of Exchange Rate Volatility on Economic Growth: Evidence from West African Monetary Zone

Fofanah

2021

int.jour.sci.res.mana.

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This study examined the effects of exchange rate volatility on economic growth in four WAMZ countries. The study uses the pooled ordinary least squares, fixed effects and random effects models, and obtains a robust standard error estimate of the model by applying xtreg, cluster()fe. The empirical analysis shows that the effects of exchange rate volatility on economic growth is insignificant. The results also show a positive correlation between exports and economic growth. This implies that policies aimed at increasing exports through an appropriate exchange rate may be beneficial countries. In addition, the analysis also shows a positive and significant link between imports and economic growth rates. Therefore, this confirms that the countries actually benefit from imports resulting from the competitive pressure generated by the import of consumer goods and professional knowledge, and also from the transfer of technology embodied in the import of goods by producers. Hence, the policy of removing import barriers will benefit the countries. In addition, the results show that there is a positive correlation between the nominal exchange rate and economic growth rate. Therefore, it shows that the nominal exchange rate depreciation policy can play an important role in improving the economic growth of the countries. However, the research results show that there is an inverse relationship between the real exchange rate and economic growth. Considering the importance of the real exchange rate, this study suggests the introduction of a common currency in the WAMZ to reduce the negative effects of the real exchange rate on economic growth.

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Real Exchange Rate Volatility and Export Performance in the West African Monetary Zone (WAMZ)

Cited by 8 publications

References 25 publications

Is there a nexus between China outward foreign direct investment and welfare in Côte dʼIvoire? Empirical evidence from the Toda–Yamamoto procedure

Is there a nexus between China outward foreign direct investment and welfare in Côte dʼIvoire? Empirical evidence from the Toda–Yamamoto procedure

Effects of Exchange Rate Volatility on Trade: Evidence from West Africa

Effects of Exchange Rate Volatility on Economic Growth: Evidence from West African Monetary Zone

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