Heterogeneous Effects of Exchange Rate Regimes on Misalignments in Africa

Article DOI: https://doi.org/10.57017/jaes.v20.1(87).03

Author(s):

Nahoussé DIABATE Department of Economics and Development Sciences Alassane Ouattara University, Bouaké, Ivory Coast
Mounoufié Valery KOFFI Department of Economics, Faculty of Economics and Management Alassane Ouattara University, Bouaké, Côte d’Ivoire
Ange Kouamé Bi KACOU Department of Economics and Development Sciences Alassane Ouattara University, Bouaké, Ivory Coast

Abstract:

The aim of our study is to analyse the heterogeneous effects of exchange rate regimes on real exchange rate misalignments in Africa. The BEER approach is employed to determine equilibrium exchange rates and the degree of misalignments. We use the Grouped Fixed Effect estimator. The study relies on annual data covering 37 African countries over the period 1996-2019. Considering Rodrik (2008) and the Balassa-Samuelson effect, two groups of countries have been identified endogenously. Furthermore, irrespective of the classification (country group or income level), fixed exchange rate regimes have a positive impact on misalignments, while intermediate and flexible exchange rate regimes have a negative effect. Additionally, the impact of flexible exchange rate regimes is greater than that of intermediate exchange rate regimes. Thus, African countries should prioritize floating regimes (intermediate and flexible) to contain the level of misalignment. The major innovation of this study lies in the use of the Grouped Fixed Effect estimator. This allowed for extending the study to cover the entire African continent, unlike previous studies.

Copyright© 2025 The Author(s). This article is distributed under the terms of the license CC-BY 4.0., which permits any further distribution in any medium, provided the original work is properly cited.

How to cite:

Diabaté, N., Koffi, M. V., Kacou, B. K. A. (2025). Heterogeneous effects of exchange rate regimes on misalignments in Africa. Journal of Applied Economic Sciences, Volume XX, Spring, 1(87), 35 – 50. https://doi.org/10.57017/jaes.v20.1(87).03

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