Real Exchange Rate and Manufacturing Value Added in Africa: What Impacts?

A recent current of literature has suggested that low-income countries should systematically undervalue their currencies and adopt a floating exchange rate regime in order to drive their industrialization. Over the period between 2000 and 2015, this article estimates the impact of the real exchange rates of forty Sub-Saharan African countries—the majority of which are low-income and have a fixed exchange rate regime—on their manufacturing value added. It appears that the real exchange rates of African currencies against the dollar and the euro have little impact on manufacturing value added; but their appreciation against the renminbi (as long as this remains moderate) promotes the growth of manufacturing industries in Africa, while their appreciation against the currencies of other developing countries slows this growth. The diversity of these results does not advocate a systematic depreciation of African currencies.