Analysis of Exchange Rate Volatility on Trade Balance in Sub-Saharan Africa (SSA): Stochastic Frontier Approach

Authors

  • Munyentwari Jean Claude University of Kigali, Rwanda
  • Dr. Afolabi Luqman University of Kigali, Rwanda

DOI:

https://doi.org/10.53819/81018102t2358

Abstract

This study assessed the exchange rate variables and trade balance covering the period from 1990 till 2022 in SSA. The exchange rate variables shall be included in the study are the population growth, The Gross Domestic Product, Real Effective Exchange Rate and the inflation rate. The data was collected from World Bank Group. In this study theories used are theory of efficiency market hypothesis developed by lyke (2020), the Marshall-learner condition developed by (Mahmud & Yucel 2004), J-Curve and Exchange rate pass-through theories. An econometric approach was used to find out answers to the research objectives and hypothesis. A regression analysis was used to find out relationship among variables while a panel VAR and Panel Granger was used to find out the long and short-run relationship among them. Several tests such as  stochastic frontier models for panel data , Stationarity, post estimation test like normality, heteroscedasticity, autocorrelation and multicollinearity were conducted in this study. The  results of the causality test using the standard Granger causality test demonstrate that there is unidirectional causality from trade balance to population growth , gross Domestic Product , inflation and  Real effective exchange rate `.The estimation techniques including the fully modified ordinary least squares (FMOLS), Dynamic ordinary least squares (DOLS), and Canonical cointegration Regression (CCR) were used to test the consistency and Robustness of the results that were generated using the ARDL bounds testing method. This study will help the policy makers, the government authorities, the researchers and scholars to understand the exchange rate volatility on the trade balances of SSA’s economies.

Author Biographies

Munyentwari Jean Claude, University of Kigali, Rwanda

Master of Science in Economics, University of Kigali, Rwanda

Dr. Afolabi Luqman, University of Kigali, Rwanda

Senior Lecturer, University of Kigali, Rwanda

References

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Published

2024-02-29

How to Cite

Munyentwari , J. C., & Afolabi , L. (2024). Analysis of Exchange Rate Volatility on Trade Balance in Sub-Saharan Africa (SSA): Stochastic Frontier Approach. Journal of Economics, 8(1), 37–50. https://doi.org/10.53819/81018102t2358

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Section

Articles