n African Finance Journal - Long-run real exchange rate movements in Africa : parallel market and official rates

Volume 2, Issue 2
  • ISSN : 1605-9786



This paper poses the question whether parallel market and official real exchange rates in Africa behave in a manner consistent with the long-run purchasing power parity hypothesis. A recent econometric method, the panel unit root test, enables us to examine the long-run behaviours of real exchange rates by pooling the time-series data. Using data for 16 countries, our study concludes that the parallel market rates in Africa move consistently with the long-run PPP hypothesis, but the official rates follow a non-stationary process. This seems to suggest the existence of substantial parallel market premiums in Africa.

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