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JOURNAL OF APPLIED BUSINESS AND ECONOMICS
Currency Depreciations and the Trade Balance: The Case of Sub-Sahara Africa
Author(s): Glenville Rawlins
Citation: Glenville Rawlins, (2011) "Currency Depreciations and the Trade Balance: The Case of Sub-Sahara Africa," Journal of Applied Business and Economics, Vol. 12, Iss. 6, pp. 132 - 148
Article Type: Research paper
Publisher: North American Business Press
Abstract:
Against the backdrop of the impressive economic growth rate of Sub Sahara African (SSA) economies of the last decade, this paper explores the relationship between the trade balance and the real exchange rate for nineteen SSA countries. This is a bilateral approach between a panel of these SSA countries and each of four industrialized countries; the US, Britain, France and Japan. After Unit Root Tests establish the non-stationarity of almost all of these variables used in the study, the paper employs the Johansen-Fisher Panel Cointegration technique, to investigate the existence of a stable long term relationship between bilateral currency depreciations and the trade balance for the panel, and the aforementioned industrial nations individually. The results are generally mixed, with the tentative implication that currency devaluations would be an effective policy tool in reversing the precarious balance of payment situation facing most of these countries.
