EQUILIBRIUM REAL EXCHANGE RATE AND EVOLUTION OF FUNDAMENTALS IN WAEMU
The purpose of the present study is to assess the empiric relation between
equilibrium real exchange rate and the evolution of the fundamentals in the WAEMU.
First, an equilibrium real exchange rate is estimated from a set of economic
fundamentals as NATREX model has shown and this, by through a panel estimation.
Next, a misalignment indicator of the real exchange rate has been inferred from these
estimations. The results of this survey have helped put into question the idea
according to which fixed exchange would be conducive to the overestimation of its
real exchange rate. The survey reveals that, the real exchange rate of WAEMU is
broadly underestimated over the survey period (1989-2008); with a much low extent.
This result allows also to put emphasis on the importance of the incentive tax policy
and diversification of cash crops in the management of distortions of real exchange
rate.
Keywords:
Equilibrium Real Exchange Rate; Misalignment; Natrex; Fundamentals,WAEMU.
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