Exchange Rate Regime Choice and Economic Growth: An Empirical Analysis on African Panel Data

2023-07-29 06:14:11 Viewed: 1406 Downloads: 3120
  • Exchange Rate Regime Choice and Economic Growth: An Empirical Analysis on African Panel Data

      Anass Abouelkhair and Yasser Y. Tamsamani

     Publisher: African Review of Economics and Finance

    Pub: 2023-07-29 06:14:11

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  • The purpose of this paper is twofold. First, for a large panel of African countries, the thesis of currency neutrality is tested and the exchange rate regimes are classified according to their economic performance. Second, it seeks to identify the economies structural characteristics associated with a specific exchange rate regime that promotes economic growth. The results of the estimated models reject the currency neutrality hypothesis and highlight an outperformance of intermediate exchange rate regimes. Specifically, they show that the intermediate regimes are more conductive to economic growth in the case of countries that have experienced positive terms-of-trade shocks and benefited from FDI inflows. On the other hand, the opening of capital account seems incompatible with intermediate regimes, and external indebtedness does not promote economic growth regardless of the adopted exchange rate regime.

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  • Keywords

    Exchange rate regime, Economic growth, Neutrality hypothesis, Panel data, Africa


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