The Relationship Between the Foreign Exchange Regime and Macroeconomic Performance in Eastern Africa

By Janet Gale Stotsky, Manuk Ghazanchyan, Olumuyiwa S Adedeji, Nils Øyvind Mæhle

June 1, 2012

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Format: Chicago

Janet Gale Stotsky, Manuk Ghazanchyan, Olumuyiwa S Adedeji, and Nils Øyvind Mæhle. The Relationship Between the Foreign Exchange Regime and Macroeconomic Performance in Eastern Africa, (USA: International Monetary Fund, 2012) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This study examines the relationship between the foreign exchange regime and macroeconomic performance in Eastern Africa. The study focuses on seven countries, five of which decisively liberalized their foreign exchange regimes. The study assesses the relationship between (i) growth and various determinants, including the exchange regime, the real exchange rate, and current account liberalization; and (ii) inflation and various determinants, including lagged inflation, the nominal exchange rate, the exchange regime, and liberalization. We find that in our sample, for the determinants of growth, investment and the real exchange rate are significant determinants but not the exchange regime or liberalization; and for inflation, the lagged inflation rate, nominal exchange rate, and the de facto regime are significant. Exchange rate pass-through is limited.

Subject: Exchange rate arrangements, Exchange rate pass-through, Exchange rates, Foreign exchange, Inflation, Prices

Keywords: And inflation, Descriptive analysis, East Africa, Exchange rate arrangements, Exchange rate pass-through, Exchange rate reforms and regimes, Exchange rate regime, Exchange rates, Foreign exchange regime, Growth, Inflation, Low-inflation regime, Overvalued exchange rates, Pass-through coefficient, Regime classification, WP

Publication Details

Pages:

54
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/148
Stock No:

WPIEA2012148
ISBN:

9781475504170
ISSN:

1018-5941

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