Journal of African Trade

Volume 7, Issue 1-2, December 2020, Pages 69 - 83

Exchange Rate Dynamics and Trade Balance in Selected African Countries

Authors
Mohammed Shuaibu1, *, ORCID, Abdulrasheed Isah2, ORCID
1Department of Economics, Ahmadu Bello University, Zaria, Nigeria
2Department of Economics, Nile University of Nigeria, Abuja, Nigeria
*Corresponding author. Email: mohammed_shuaibu@yahoo.com
Corresponding Author
Mohammed Shuaibu
Received 15 April 2020, Accepted 11 December 2020, Available Online 29 December 2020.
DOI
https://doi.org/10.2991/jat.k.201218.001How to use a DOI?
Keywords
Trade balance, exchange rate, asymmetry, NARDL
Abstract

African countries have over the years experienced persistent current account deficits. The role of asymmetries in explaining the response of trade balance to exchange rate movement has not received adequate attention as linear models dominate extant empirical literature. In this paper, we examined the impact of exchange rate on the trade balance in five African countries using both linear and nonlinear autoregressive distributed lag models to analyze data for the period 1980–2018. The linear model revealed that the J-curve holds in Uganda in the short run, whereas evidence of long-run J-curve effect was found only in Algeria. However, the nonlinear analysis showed that the short-run J-curve holds for South Africa and Uganda whereas a long-run J-curve effect was found in Algeria and Uganda. The results make a case for modeling asymmetries as the nonlinear model performed relatively better. An important policy implication is the need to address structural imbalances in the economy to leverage on the exchange rate and trade policies to improve trade outcomes.

Copyright
© 2020 African Export-Import Bank. Publishing services by Atlantis Press International B.V.
Open Access
This is an open access article distributed under the CC BY-NC 4.0 license (http://creativecommons.org/licenses/by-nc/4.0/).

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Journal
Journal of African Trade
Volume-Issue
7 - 1-2
Pages
69 - 83
Publication Date
2020/12
ISSN (Online)
2214-8523
ISSN (Print)
2214-8515
DOI
https://doi.org/10.2991/jat.k.201218.001How to use a DOI?
Copyright
© 2020 African Export-Import Bank. Publishing services by Atlantis Press International B.V.
Open Access
This is an open access article distributed under the CC BY-NC 4.0 license (http://creativecommons.org/licenses/by-nc/4.0/).

Cite this article

TY  - JOUR
AU  - Mohammed Shuaibu
AU  - Abdulrasheed Isah
PY  - 2020
DA  - 2020/12
TI  - Exchange Rate Dynamics and Trade Balance in Selected African Countries
JO  - Journal of African Trade
SP  - 69
EP  - 83
VL  - 7
IS  - 1-2
SN  - 2214-8523
UR  - https://doi.org/10.2991/jat.k.201218.001
DO  - https://doi.org/10.2991/jat.k.201218.001
ID  - Shuaibu2020
ER  -