Skip to Main Navigation

Adjustment with a fixed exchange rate : Cameroon, Cote d'Ivoire and Senegal (English)

As members of the CFA Franc Zone, Cameroom, Cote d'Ivoire, and Senegal cannot use the nominal exchange rate as a tool of macroeconomic adjustment. This article considers these countries' responses to the commodity and oil price shocks of the 1970s in light of this and other institutional constraints. Using a two sector model, it shows that there exist instruments that, in principle, permit the real exchange rate depreciation necessary for adjusting to macroeconomic imbalances. The authors interpret the very different adjustment experiences of the three countries (despite their common economic structure and institutional setting) in terms of different uses of these instruments. Alternative assumptions about the labour market leave the qualitative nature of the results unaltered. Statistical analysis of data from the three countries confirms the model's linking of the current account and real exchange rate with the instruments of adjustment.

Details

Downloads

COMPLETE REPORT

Official version of document (may contain signatures, etc)

  • TXT*
  • Total Downloads** :
  • Download Stats
  • *The text version is uncorrected OCR text and is included solely to benefit users with slow connectivity.

Citation

Devarajan, Shantayanan de Melo, Jaime

Adjustment with a fixed exchange rate : Cameroon, Cote d'Ivoire and Senegal (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/601971468770731771/Adjustment-with-a-fixed-exchange-rate-Cameroon-Cote-dIvoire-and-Senegal