The effects of exchange rate changes on Sub-Saharan Africa trade

Abstract

This study investigates the impact of exchange rate changes on imports, exports and trade balance in Sub-Saharan Africa (SSA). The results indicate that there is a positive relationship between exchange rate changes and imports, albeit the degree of responsiveness was extremely low. These were inconsistent with economic theory and can be attributed to the fact that many African countries largely depend on imports, and tend to be invariant to exchange rate changes. Hence, a depreciation of their exchange rates may have little or no effects on imports. The study recommends that SSA authorities draw up strategies and programs that will make the economies less reliant on imports. The significant negative relationship found between exchange rate changes and exports suggests that the policy of exchange rate depreciation may not have the desired effects of boosting exports. The study found no significant relationship between exchange rate changes and trade balance.