Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/265382 
Year of Publication: 
2022
Series/Report no.: 
EIB Working Papers No. 2022/12
Publisher: 
European Investment Bank (EIB), Luxembourg
Abstract: 
This paper investigates the determinants of nominal exchange rates, their volatility, and crash risk in Africa's lower and lower-middle income countries (LLMICs). It combines macro-panel estimations for 15 African LLMICs with floating or lightly managed exchange rates, with insights from 13 semi-structured interviews with 17 foreign exchange market participants in six case study countries. It shows the important role African LLMICs' distinct productive and export structure, concentrated in a few agricultural and mineral-based commodities, and recent financial integration for exchange rate determination. In particular, whereas productive factors such as terms of trade, export concentration, and export prices are found to have a significant impact on the exchange rate level and volatility, financial factors including the interest rate differential, international market conditions, and short-term financial flows, matter for the likelihood of currencies to experience sudden and large exchange rate movements.
Persistent Identifier of the first edition: 
ISBN: 
978-92-861-5371-6
Document Type: 
Working Paper

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