Exchange Rate and Foreign Interest Rate Linkages for Sub-Saharan Africa Floaters
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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. 2012/208
Subject:
Balance of payments Capital account Exchange rate adjustments Exchange rates Financial institutions Foreign exchange Nominal effective exchange rate Treasury bills and bonds
English
Publication Date:
August 1, 2012
ISBN/ISSN:
9781475505580/1018-5941
Stock No:
WPIEA2012208
Pages:
21
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