International Economics

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Browsing International Economics by Author "Atnafu, Gebremeskel (PhD)"

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    Does the Exchange Rate Regime Matter for East African Countries?
    (Addis Ababa University, 2018-10) Mohammed, Hassen; Atnafu, Gebremeskel (PhD)
    This study aimed at identifying whether the choice of exchange rate regime (ERR) matter for the inflation and economic growth of East African countries and identifying which regimes do best for the region. To do so it used the panel data of 10(ten) selected countries observed from 1996-2016. It used descriptive statistics and econometric analysis techniques. Even though the de-jure regime was much smaller than the de-facto, the study found that intermediate regimes dominated other ERRs. Relatively the highest levels of inflation are recorded in Malawi and Zambia while Uganda had the lowest inflation. The analysis also shows that the highest average growth level was that of Mozambique and the lowest was that of Burundi. The study found that both the claim and practice of intermediate regimes are related to lower inflation compared to pegged regimes. In the 'coarse' classification crawling regimes are negatively related to inflation compared to pegged regimes. Moreover, estimation of the 'fine' classification shows de-facto crawling peg and crawling band are negatively related to inflation compared to currency board arrangement. The study also found that de-facto intermediate regimes are negatively related to economic growth. When the 'coarse' classification of regimes is applied all intermediate regimes (i.e. crawling, managed floating and free falling regimes) are negatively related to growth. However, when institutional quality is controlled almost all the regime dummies of the 'fine' classification became insignificant in the growth regression. The result implies that the choice of ERR should be based on whether countries target either inflation or growth. Future researchers could focus on "why countries choose regimes?".