Current account sustainability in Sub-Saharan Africa: Does the exchange rate regime matter? |
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Institution: | 1. Department of Economics, EconomiX-CNRS, University of Paris Ouest Nanterre La Défense, Nanterre 92001, France;2. Université Paris Est, ERUDITE (EA437), UPEC, UPEMLV, 94010 Créteil, France;1. LEM, University of Lille 1, France;2. ThEMA, University of Cergy-Pontoise, France |
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Abstract: | This paper aims at studying the sustainability of current accounts in Sub-Saharan Africa and determining whether this sustainability depends on the exchange rate regime. Relying on a formal theoretical framework and recent panel cointegration techniques, our findings show that current accounts have been globally sustainable in Sub-Saharan Africa countries over the 1980–2011 period. However, this sustainability has been lower for countries operating a fixed exchange rate regime or belonging to a monetary union. We also find that the difference in the level of sustainability could be explained by a higher persistence in the current account adjustment of countries operating under rigid exchange rate regimes. |
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