Exchange rate misalignment, state fragility, and economic growth in sub-Saharan Africa

Mazorodze, Brian Tavonga; Camarero, Mariam

doi:10.1080/23322039.2021.1898113

Cited by 8 publications

(10 citation statements)

References 43 publications

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“…The misalignment coefficients are unanimously negative and statistically significant irrespective of specifications and estimation. Therefore misalignment in RER undermines the growth of EMs, and hence it confirms the findings obtained by Mazorodze (2021), Nouira andSekkat (2012), andSchröder (2017). Therefore, we conclude that any kind of distortions in RER exerts an adverse impact on economic growth, which is further warranted by the growth deteriorating effects of undervaluation and overvaluation.…”

Section: Growth Regressionssupporting

confidence: 88%

“…This view regards both sorts of RER misalignments. That is, deviations of RER from its equilibrium values in any direction are detrimental from a long-term growth perspective, which has been supported by several empirical studies (Aguirre & Calderon, 2005;Mazorodze, 2021;Sallenave, 2010;Schröder, 2013Schröder, , 2017Toulaboe, 2006). Edwards (1989) was the first pioneer to estimate the impact of RER misalignment on economic growth for 12 developing countries over the period 1962-1984. The study finds misallocation of resources due to the distortions in relative prices of tradable and non-tradable sectors caused by RER misalignment, which damages economic growth.…”

Section: Introductionmentioning

confidence: 75%

“…Schröder (2013Schröder ( , 2017 suggests that not equilibrium RER but its misalignments do affect economic growth in 63 developing countries over 1970-2007. In a most recent study, Mazorodze (2021) investigates whether currency misalignment and state fragility have a role in the sluggish growth of sub-Saharan Africa between 2009 and 2018 applying the SGMM. It suggests that RER misalignment has a significantly negative impact on growth that increases with state fragility.…”

Section: Introductionmentioning

confidence: 99%

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The effect of real exchange rate misalignment on economic growth: Evidence from emerging markets

Mamun

Akça

Bal

et al. 2021

EJEM

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Purpose ─ This study investigates the effect of real exchange rate (RER) misalignment on economic growth performance for 21 emerging markets from 1980 through 2016.Methods ─ The study measures the RER misalignment series for 21 emerging markets relying on the single-equation approach. It estimates the effect of RER misalignment, undervaluation, and overvaluation on economic growth performance using a dynamic panel system generalized method of moments approach.Findings ─ The study finds that the RER of emerging markets is significantly misaligned. The study also argues that any deviation of the RER from its equilibrium value impairs economic growth. The view that overvaluation erodes growth was accepted, while a real undervaluation is found to be a deteriorating growth fact.Implication ─ From the policy perspective, policymakers should advocate appropriate exchange rate policies to check its sustained misalignments over time to enrich the ability of concerned authorities to attain the growth target by using it as a policy instrument.Originality ─ Apart from the lack of a unique analytical framework for determining RER misalignment, most studies on the impact of RER misalignment in emerging markets largely ignore its growth effects. The study is an attempt to address these gaps.

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Section: Growth Regressionssupporting

confidence: 88%

Section: Introductionmentioning

confidence: 75%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

The effect of real exchange rate misalignment on economic growth: Evidence from emerging markets

Mamun

Akça

Bal

et al. 2021

EJEM

View full text Add to dashboard Cite

show abstract

“…The findings of numerous panel studies ( Béreau et al., 2009 ; Sallenave, 2010 ; Vieira and MacDonald, 2012 ; Couharde and Sallenave, 2013 ; Berg and Miao, 2010 ; Elbadawi et al., 2012 ; Mazorodze, 2021 ) and time series studies ( Wong, 2013 ; Akram and Rath, 2017 ; Ndlela, 2012 ) are consistent with the Rodrik's (2008) view. Undervaluation fosters growth by promoting the efficiency of small tradable sectors while overvaluation harms it ( Berg and Miao, 2010 ).…”

Section: Empirical Reviewsmentioning

confidence: 66%

“…The magnitude of misalignment and the speed of convergence towards the equilibrium are more pronounced for emerging economies than industrialized countries. Using the GMM on the data from 13 Sub-Saharan African (SSA) countries, Mazorodze (2021) also supported the negative effect of misalignment that amplifies for fragile states. The findings of Wong (2013) for Malaysia and Akram and Rath (2017) for India also suggested that undervaluation promotes efficiency of small tradable sectors while overvaluation hurts growth through inefficient resource allocation.…”

Section: Empirical Reviewsmentioning

confidence: 82%

Real exchange rate misalignment and economic growth in East African least developed countries

Ayele

2022

Heliyon

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Exchange rate misalignment and financial development in Africa

Nchofoung,

Ojong,

Gachili

2024

Int. J Fin Econ

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We examine the effect of misaligned exchange rates on financial development in Africa. Results from quantile regression techniques and the IV Lewbel estimator reveal that exchange rate misalignment significantly hampers financial development on that continent. This result is robust across financial institutions and financial markets. We also show that while the effects of misaligned exchange rates are negative on financial institutions and positive on financial markets in African franc‐zone countries, the effects are consistently negative across all financial sectors in the non‐franc‐zone countries there. When robustness assessment is done using quantile regression, the results show that the negative effect of misalignment on financial development is only feasible from the 75th percentile and higher in Africa in general and for the non‐franc‐zone countries in particular.

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Exchange rate misalignment, state fragility, and economic growth in sub-Saharan Africa

Cited by 8 publications

References 43 publications

The effect of real exchange rate misalignment on economic growth: Evidence from emerging markets

The effect of real exchange rate misalignment on economic growth: Evidence from emerging markets

Real exchange rate misalignment and economic growth in East African least developed countries

Exchange rate misalignment and financial development in Africa

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