Exchange Rate and Foreign Interest Rate Linkages for Sub-Saharan Africa Floaters

Author/Editor: Alun H. Thomas
Publication Date: August 01, 2012
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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: The paper considers the determinants of exchange rate movements among sub-Saharan countries that have flexible exchange rate regimes. The determinants are based on the law of one price and interest parity conditions. Results indicate that the exchange rates have responded significantly to changes in the US Treasury bill rate and to the EMBI spread in recent years. The effects are more important for countries with open capital accounts. On the other hand the paper does not provide any support for the interest rate parity theory because domestic interest rates have no bearing on exchange rate movements.
Series: Working Paper No. 12/208
Subject(s): Exchange rates | Flexible exchange rate policy | Floating exchange rates | Interest rates

Author's Keyword(s): Exchange Rate | Interest Rate | Interest Parity
Publication Date: August 01, 2012
ISBN/ISSN: 9781475505580/1018-5941 Format: Paper
Stock No: WPIEA2012208 Pages: 21
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