The Relationship Between the Foreign Exchange Regime and Macroeconomic Performance in Eastern Africa

Author/Editor:

Janet Gale Stotsky ; Manuk Ghazanchyan ; Olumuyiwa S Adedeji ; Nils Øvind Maehle

Publication Date:

June 1, 2012

Electronic Access:

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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:

This study examines the relationship between the foreign exchange regime and macroeconomic performance in Eastern Africa. The study focuses on seven countries, five of which decisively liberalized their foreign exchange regimes. The study assesses the relationship between (i) growth and various determinants, including the exchange regime, the real exchange rate, and current account liberalization; and (ii) inflation and various determinants, including lagged inflation, the nominal exchange rate, the exchange regime, and liberalization. We find that in our sample, for the determinants of growth, investment and the real exchange rate are significant determinants but not the exchange regime or liberalization; and for inflation, the lagged inflation rate, nominal exchange rate, and the de facto regime are significant. Exchange rate pass-through is limited.

Series:

Working Paper No. 12/148

Subject:

English

Publication Date:

June 1, 2012

ISBN/ISSN:

9781475504170/1018-5941

Stock No:

WPIEA2012148

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

54

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