Toward the African Continental Free Trade Area
This paper evaluates the role of economic integration and democracy in rationalizing differences in real exchange rate misalignments across exchange rate regimes in Africa. To this end, the paper derives competing indexes of misalignment using modern cointegration techniques while accounting for cross-sectional dependence. The findings indicate that fixed regimes per se are not prone to more misalignments, as institutional quality and economic links with foreign partners critically matter in explaining the observed discrepancies. Furthermore, when distinguishing between African and international partners in investment agreements, the extent of misalignment differs according to the level of democracy, as democratic countries can afford intermediate regimes, while for weak democracies, fixed regimes are required to curb disequilibria. Finally, membership in a regional economic community significantly reduces the magnitude of misalignments. The results imply that the quality of institutions, more than the type of the exchange rate regime, is called into question and should be the focus of efforts ahead of successful implementation of the African Continental Free Trade Area.
Main Authors: | , , |
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Format: | Working Paper biblioteca |
Language: | English |
Published: |
World Bank, Washington, DC
2021-02
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Subjects: | ACFTA, FREE TRADE AGREEMENT, REGIONAL INTEGRATION, EXCHANGE RATE REGIME, DEMOCRACY, INVESTMENT AGREEMENT, TRADE AND INVESTMENT, AFRICAN CONTINENTAL FREE TRADE AGREEMENT, |
Online Access: | http://documents.worldbank.org/curated/en/451191613569046516/Toward-the-African-Continental-Free-Trade-Area-The-Effects-of-Economic-Integration-and-Democracy-on-Real-Misalignments-across-Exchange-Rate-Regimes https://hdl.handle.net/10986/35144 |
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dig-okr-10986351442024-08-09T06:08:19Z Toward the African Continental Free Trade Area The Effects of Economic Integration and Democracy on Real Misalignments across Exchange Rate Regimes Owoundi Fouda, Ferdinand Avom, Desire Kuete, Flora Yselle ACFTA FREE TRADE AGREEMENT REGIONAL INTEGRATION EXCHANGE RATE REGIME DEMOCRACY INVESTMENT AGREEMENT TRADE AND INVESTMENT AFRICAN CONTINENTAL FREE TRADE AGREEMENT This paper evaluates the role of economic integration and democracy in rationalizing differences in real exchange rate misalignments across exchange rate regimes in Africa. To this end, the paper derives competing indexes of misalignment using modern cointegration techniques while accounting for cross-sectional dependence. The findings indicate that fixed regimes per se are not prone to more misalignments, as institutional quality and economic links with foreign partners critically matter in explaining the observed discrepancies. Furthermore, when distinguishing between African and international partners in investment agreements, the extent of misalignment differs according to the level of democracy, as democratic countries can afford intermediate regimes, while for weak democracies, fixed regimes are required to curb disequilibria. Finally, membership in a regional economic community significantly reduces the magnitude of misalignments. The results imply that the quality of institutions, more than the type of the exchange rate regime, is called into question and should be the focus of efforts ahead of successful implementation of the African Continental Free Trade Area. 2021-02-18T14:46:27Z 2021-02-18T14:46:27Z 2021-02 Working Paper Document de travail Documento de trabajo http://documents.worldbank.org/curated/en/451191613569046516/Toward-the-African-Continental-Free-Trade-Area-The-Effects-of-Economic-Integration-and-Democracy-on-Real-Misalignments-across-Exchange-Rate-Regimes https://hdl.handle.net/10986/35144 English Policy Research Working Paper;No. 9548 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank application/pdf text/plain World Bank, Washington, DC |
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ACFTA FREE TRADE AGREEMENT REGIONAL INTEGRATION EXCHANGE RATE REGIME DEMOCRACY INVESTMENT AGREEMENT TRADE AND INVESTMENT AFRICAN CONTINENTAL FREE TRADE AGREEMENT ACFTA FREE TRADE AGREEMENT REGIONAL INTEGRATION EXCHANGE RATE REGIME DEMOCRACY INVESTMENT AGREEMENT TRADE AND INVESTMENT AFRICAN CONTINENTAL FREE TRADE AGREEMENT |
spellingShingle |
ACFTA FREE TRADE AGREEMENT REGIONAL INTEGRATION EXCHANGE RATE REGIME DEMOCRACY INVESTMENT AGREEMENT TRADE AND INVESTMENT AFRICAN CONTINENTAL FREE TRADE AGREEMENT ACFTA FREE TRADE AGREEMENT REGIONAL INTEGRATION EXCHANGE RATE REGIME DEMOCRACY INVESTMENT AGREEMENT TRADE AND INVESTMENT AFRICAN CONTINENTAL FREE TRADE AGREEMENT Owoundi Fouda, Ferdinand Avom, Desire Kuete, Flora Yselle Toward the African Continental Free Trade Area |
description |
This paper evaluates the role of
economic integration and democracy in rationalizing
differences in real exchange rate misalignments across
exchange rate regimes in Africa. To this end, the paper
derives competing indexes of misalignment using modern
cointegration techniques while accounting for
cross-sectional dependence. The findings indicate that fixed
regimes per se are not prone to more misalignments, as
institutional quality and economic links with foreign
partners critically matter in explaining the observed
discrepancies. Furthermore, when distinguishing between
African and international partners in investment agreements,
the extent of misalignment differs according to the level of
democracy, as democratic countries can afford intermediate
regimes, while for weak democracies, fixed regimes are
required to curb disequilibria. Finally, membership in a
regional economic community significantly reduces the
magnitude of misalignments. The results imply that the
quality of institutions, more than the type of the exchange
rate regime, is called into question and should be the focus
of efforts ahead of successful implementation of the African
Continental Free Trade Area. |
format |
Working Paper |
topic_facet |
ACFTA FREE TRADE AGREEMENT REGIONAL INTEGRATION EXCHANGE RATE REGIME DEMOCRACY INVESTMENT AGREEMENT TRADE AND INVESTMENT AFRICAN CONTINENTAL FREE TRADE AGREEMENT |
author |
Owoundi Fouda, Ferdinand Avom, Desire Kuete, Flora Yselle |
author_facet |
Owoundi Fouda, Ferdinand Avom, Desire Kuete, Flora Yselle |
author_sort |
Owoundi Fouda, Ferdinand |
title |
Toward the African Continental Free Trade Area |
title_short |
Toward the African Continental Free Trade Area |
title_full |
Toward the African Continental Free Trade Area |
title_fullStr |
Toward the African Continental Free Trade Area |
title_full_unstemmed |
Toward the African Continental Free Trade Area |
title_sort |
toward the african continental free trade area |
publisher |
World Bank, Washington, DC |
publishDate |
2021-02 |
url |
http://documents.worldbank.org/curated/en/451191613569046516/Toward-the-African-Continental-Free-Trade-Area-The-Effects-of-Economic-Integration-and-Democracy-on-Real-Misalignments-across-Exchange-Rate-Regimes https://hdl.handle.net/10986/35144 |
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