Business Intelligence

Exchange Rate Regimes And Trade

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Executive Summary

This paper revisits the link between exchange rate regimes and trade in the context of Africa's exchange rate arrangements. Applying an augmented gravity model that includes measures of currency unions and pegged regimes, the paper compares Africa's experience with that of the world. The authors' results suggest that both currency unions and direct pegs promote bilateral trade in Africa vis-?-vis more flexible exchange rate regimes, and that their effect is almost double for the region than that for an average country in the world sample.

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