Effect of exchange rate policies on development

This programme covers issues related to the impact of exchange rate policies on development, the quality of public spending, commodity price volatility and terms of trade deterioration, and macroeconomic modelling.

FERDI is involved with CERDI on this programme.

The analysis of exchange rate policies focused mainly on Africa and its role in the competitiveness of the continent's economies, in particular through the Sustainable Competitiveness Observatory.  In recent years, this interest has been reflected in Sylviane Guillaumont Jeanneney's book Politiques et stratégies de change dans les pays en développement  (Exchange rate policies and strategies in developing countries) published by Economica in 2015.

Particular attention has been paid to the issue of the CFA franc and the Eco and to the conduct of macroeconomic policy in the context of monetary unions. FERDI advocates a scientific and dispassionate look at possible and desirable developments in African monetary systems.

Work carried out in partnership with the University of Manchester on financial volatility, macro-prudential regulation and growth in low-income countries contributed to the existing analytical literature and provided new evidence on the impact of financial volatility and its determinants on economic growth, with particular attention to the case of the low-income countries in Sub-Saharan Africa. 

Achievements 2021-2022

What impact do monetary unions have on economic growth?
FERDI has published a series of papers on CFA francs and their evolution. The authors recall the importance for states of exchange rate stability and the role that a guaranteed convertibility can play in achieving this. Their research puts into perspective the idea of a permanent overvaluation of CFA francs. They show that membership of the Franc Zone has not had a negative impact on economic growth, but has contributed to poverty reduction. In a CNRS blog of 16 March 2022, Patrick Plane and Camille da Piedade, both members of the Cerdi-UCA and Ferdi, discuss the possible misalignments of the exchange rate in each of the two monetary unions that made up the Franc Zone using two different measures of the equilibrium exchange rate (Plane P., da Piedade C. (2022) Les francs CFA sont-ils à leur niveau d'équilibre? Revue française d'économie, vol. 36(4), pp.87-127, April).

Study of the quality of public spending.
FERDI is collaborating with CERDI to provide a tool for analysing and measuring the efficiency of public spending. The application is accompanied by a user’s guide “L'efficacité de la dépense publique: mesure et determinants” (“The quality of public spending in the world: measurement and determinants”). https://data.cerdi.uca.fr/afd-pubexp/

Macroeconomic support to the European Union.
In December 2021, FERDI's experts made a commitment to the Budget Support Division of the European Union (EU) Commission's International Partnerships Directorate of macroeconomic support for the year 2022.

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