Real Exchange Rate, Exchange Rate Volatility and Trade Balance in Sub - Saharan African Countries: A Generalized Method of Moment (GMM) Approach
Journal Title: International Journal of Scientific Research and Management - Year 2017, Vol 5, Issue 11
Abstract
This study examines the effect of real exchange rate and exchange rate volatility on trade balance in Sub - Saharan African countries from 2006 to 2016. Fo urteen countries in the region are selected for the study. Gene ralized Method of Moment (GMM) is use d as the estimation technique , and exchange rate volatility i s generated from real exchange rate using Generalized Autoregressive Conditional Heteroskedasticity (GARCH). The result shows that real exchange rate and exch ange rate volatility have positive and significant ef fect on trade balance in sub - Saharan African countries. Furthermore, gross domestic product (domestic income) has positive and significant effect on trade balance while world gross domestic product (fore ign income) has negative effect on trade balance. The study concludes that the region should take advantage of exchange rate volatility in improving their trade balance
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Olomola .
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