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SOURCES OF REAL EXCHANGE RATE FLUCTUATIONS: EMPIRICAL EVIDENCE FROM NINE AFRICAN COUNTRIES

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Abstract:

We investigate the sources of real exchange rate fluctuations in a sample of nine African countries from 1980:01 to 2005:04, using a trivariate structural vector autoregression. The analysis is motivated by a stochastic sticky-price model from which three shocks are identified; demand, supply and monetary shocks. The results indicate that demand shocks are the predominant source of real exchange rate movements in these countries, although nominal shocks have also played a small but significant role in South Africa and Botswana, and supply shocks seem to be of some relevance for Algeria, Egypt and Tanzania.

Document Type: Research Article

DOI: http://dx.doi.org/10.1111/j.1467-9957.2009.02119.x

Affiliations: Department of Economics, Loughborough University

Publication date: September 1, 2009

bpl/manc/2009/00000077/A00101s1/art00004
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