The Current Account and Real Exchange Rate Dynamics in African Countries

A. H. Ahmad, Eric. J. Pentecost

Research output: Working paper

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Abstract

Persistent international current account imbalances and real exchange rate movements have become a permanent feature of the world economy. This paper, therefore, sets out to investigate the relationship between the real exchange rate and current account dynamics of eleven African countries, using data from 1980 to 2008, based on a stochastic Mundell-Fleming model in which shocks to real exchange rates and current account have been identified as permanent and temporary. Using a bi-variate structural VAR approach, the results are in consonant with the theoretical model, with permanent shocks having permanent and positive effects on both the current account and the real exchange rates. On the other hand, while temporary shocks have insignificant effects on the real exchange rates, they have very different effects on the current accounts of different countries.
Original languageEnglish
Place of PublicationBath, U. K.
PublisherUniversity of Bath Department of Economics
Publication statusPublished - Sep 2012

Publication series

NameBath Economics Research Working Papers
No.4/12

Fingerprint

Exchange rate dynamics
Real exchange rate
African countries
Current account
Current account imbalances
Temporary shock
Structural VAR
Mundell-Fleming model
Permanent shock
World economy
Current account dynamics

Keywords

  • Real exchange rates
  • current accounts
  • structural VAR

Cite this

Ahmad, A. H., & Pentecost, E. J. (2012). The Current Account and Real Exchange Rate Dynamics in African Countries. (Bath Economics Research Working Papers; No. 4/12). Bath, U. K.: University of Bath Department of Economics.

The Current Account and Real Exchange Rate Dynamics in African Countries. / Ahmad, A. H.; Pentecost, Eric. J.

Bath, U. K. : University of Bath Department of Economics, 2012. (Bath Economics Research Working Papers; No. 4/12).

Research output: Working paper

Ahmad, AH & Pentecost, EJ 2012 'The Current Account and Real Exchange Rate Dynamics in African Countries' Bath Economics Research Working Papers, no. 4/12, University of Bath Department of Economics, Bath, U. K.
Ahmad AH, Pentecost EJ. The Current Account and Real Exchange Rate Dynamics in African Countries. Bath, U. K.: University of Bath Department of Economics. 2012 Sep. (Bath Economics Research Working Papers; 4/12).
Ahmad, A. H. ; Pentecost, Eric. J. / The Current Account and Real Exchange Rate Dynamics in African Countries. Bath, U. K. : University of Bath Department of Economics, 2012. (Bath Economics Research Working Papers; 4/12).
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