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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 30, No. 2, pp.221-249
ISSN: 1225-0279 (Print)
Print publication date 30 May 2017
Received 15 Feb 2016 Revised 27 Aug 2016 Accepted 05 Oct 2016

The Role of Foreign Exchange Rates in Sub-Saharan Countries: Empirical Comparison with Non-Euro OECD Countries Using Panel Data

Elias Sanidas ; Fetene Bogale Hunegnaw
Elias Sanidas, Corresponding author, Professor, Department of Economics, Seoul National University, Seoul, 08826, South Korea ellass@snu.ac.kr
Fetene Bogale Hunegnaw, PhD., Department of Economics, Seoul National University, Seoul, 08826, South Korea, Tel: 822-880-6360, Fax: 8228758860 fetene@snu.ac.kr
Arsi University, Ethiopia, Tel: 251910242117, Fax: 251223313430

JEL Classification: F14, F31, F43

Abstract

The effect of devaluations on economies is one of the most controversial macroeconomic policies in Sub-Saharan Africa (SSA), both theoretically and empirically. This study uses panel data from 1995-2013 for 17 SSA countries and 17 non-Euro OECD economies. The main conclusion is that exchange rates devaluations and revaluations are an effective policy instrument in improving trade balances and boosting real output in both regions. There are some similarities in the results between the two groups of nations but also many differences, which are indicated in detail in the text. For example, regarding the estimation of trade balances directly, the income effects (own GDP and foreign GDP) and the exchange rates effect seem to be more important in the case of SSA group than in the case of the OECD group. There are also some policy implications. Thus, governments in SSA nations are encouraged to further pursue both exchange rates and monetary or fiscal policies; and as they develop their industries, they may rely more and more on floating exchange rates.

Keywords:

Exchange Rates, GDP, Trade balance, Exports, Imports, Panel data, Sub Saharan and OECD countries

Acknowledgments

This research is financed by Brain Korea 21, Department of Economics, Seoul National University.

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