Factors Explaining the Real Effective Exchange Rate in Franc Zone:  A New View

Armel Mbiapep Peuwo Djouaka; Ibrahim Ngouhouo; Derick Ulrich Younda

doi:10.9734/sajsse/2023/v20i3729

Research Article Open access CC BY 4.0

Factors Explaining the Real Effective Exchange Rate in Franc Zone: A New View

Armel Mbiapep Peuwo Djouaka, Ibrahim Ngouhouo, Derick Ulrich Younda

South Asian Journal of Social Studies and Economics · pp. 260–278 · Published 10 Oct 2023

10.9734/sajsse/2023/v20i3729

Abstract

Although there is an abundant literature on the determinants of the real effective exchange rate, no study has focused specifically on all the African countries in the Franc zone, whose currencies are still pegged to the euro by a fixed parity, despite the end of the gold standard in 1971. The main objective of this article is to identify the main factors explaining the real effective exchange rate in the franc zone. The data used in this work cover 15 countries that use the CFA franc over the period 1990-2019. To achieve our objective, we mobilized several estimation methods such as the Driscoll and Kraay method, the Panel Corrected Standard Error (PCSE) and the Feasible Generalized Least Squares (FGLS) method. The results of this study reveal that inflation, money supply, the interest rate, gross domestic product per capita, imports and direct investment are the main determinants of the real effective exchange rate in the franc zone.

Driscoll and Kraay exchange rate FGLS franc zone PCSE

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Armel Mbiapep Peuwo Djouaka, Ibrahim Ngouhouo, Derick Ulrich Younda (2023). Factors Explaining the Real Effective Exchange Rate in Franc Zone: A New View. South Asian Journal of Social Studies and Economics , 260–278. https://doi.org/10.9734/sajsse/2023/v20i3729

Affiliations

Armel Mbiapep Peuwo Djouaka — Groupe de Recherche en Economie Appliquée et Développement (GREAD), Faculty of Economics and Management, Research Laboratory in Fundamental and Applied Economics (LAREFA), University of Dschang, Dschang, Cameroon.
Ibrahim Ngouhouo — Groupe de Recherche en Economie Appliquée et Développement (GREAD), Faculty of Economics and Management, Research Laboratory in Fundamental and Applied Economics (LAREFA), University of Dschang, Dschang, Cameroon.
Derick Ulrich Younda — Groupe de Recherche en Economie Appliquée et Développement (GREAD), Faculty of Economics and Management, Research Laboratory in Fundamental and Applied Economics (LAREFA), University of Dschang, Dschang, Cameroon.

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