Exchange rate management and manufactured exports in Sub-Saharan Africa

Abstract

This paper empirically assesses the impact of exchange rate policy on manufactured export performance on a panel of major Sub-Saharan African (SSA) countries over the period 1970–1992. The impact of exchange rate policy is examined through the effect of three indicators: real effective exchange rate (REER) changes, real exchange rate (RER) volatility, and (model-based measures of) RER misalignment. Export supply equations are estimated for three manufacturing sectors (textile, chemicals, and metals) and two exchange rate regimes: a fixed rate regime represented by six CFA countries and a more flexible rate regime represented by five non-CFA countries. Our results suggest that exchange rate management matters for export performance. This is corroborated both by the significant impact of changes in the REER and by the negative influence exerted independently by RER misalignment.