Cover IMF Working Papers
FEER for the CFA Franc
Author: Mr. Charalambos G Tsangarides and Mr. Yasser Abdih
Series:
IMF Working Papers
Volume/Issue:
Volume 2006: Issue 236
Language:
English
Publication Date:
01 Oct 2006
DOI:
https://doi.org/10.5089/9781451864960.001
ISBN:
9781451864960
ISSN:
1018-5941
Pages:
40
Keywords:
WP; terms of trade; natural logarithm; CFA franc; Equilibrium real exchange rate; FEER; cointegration; WAEMU; CEMAC; CEMAC adjustment speed; nominal exchange rate; WAEMU REERs; impulse response function; Real effective exchange rates; Real exchange rates; Exchange rates; Vector autoregression; Government consumption; Southeast Asia; West Africa; Central Africa; East Asia; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (328.6 KB) Download Epub
We apply the fundamentals equilibrium exchange rate (FEER) approach and the Johansen cointegration methodology to investigate the behavior of the real effective exchange rates of the two monetary unions of the CFA franc zone (CEMAC and WAEMU) vis-à-vis their long-run equilibrium paths. For both CEMAC and WAEMU, our results indicate that: (i) the fundamentals account for most of the fluctuation of the real effective exchange rates, with increases in the terms of trade, government consumption, and productivity improvements causing the exchange rate to appreciate, and increases in investment and openness leading to a depreciation; (ii) at end-2005 both the CEMAC and WAEMU real effective exchange rates were broadly in line with their long-run equilibrium values; and (iii) following a shock, reversion to equilibrium is twice as fast in WAEMU than in CEMAC.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund