Cote D'Ivoire: Competitiveness, Cocoa, and the Real Exchange Rate
30 Pages Posted: 20 Apr 2016
Date Written: November 1, 2007
Abstract
This paper explores competitiveness of Cote d'Ivoire's economy over a long period of 1960-2003 and its link with cocoa prices. The main conclusions are as follows.
First, using four measures of real effective exchange rate (REER) for the 1960-2002 period, we track the evolution of REER and conclude, inter alia, that until 2003, REER remained well below its 1994 level.
Second, we find that based on our measure of the multilateral REER with dynamic weights, which covers most recorded trade, France no longer dominates Cote d'Ivoire's trade. Instead, Cote d'Ivoire has diversified its set of trading partners. Unfortunately, it has also specialized in one export product, raw cocoa. This paper aims to contribute to the question to what extent do cocoa prices affect Cote d'Ivoire's competitiveness in world trade?
Third, the answer to this question is that cocoa prices are an important determinant of Cote d'Ivoire's competitiveness. Similar to the case of a classic "Dutch Disease," increases in the real world price of a "natural resource" (i.e., cocoa) tend to result in the appreciation of the CFA franc and a loss in competitiveness. Econometric tests further confirm that 1994 was a "break-point" not only for growth and productivity (as documented in the two related papers) but also for trade competitiveness. Recent productivity per worker trends versus wages also seem to indicate slow growth in 1996-2000, without major improvement in competitiveness.
Keywords: Economic Theory & Research, Currencies and Exchange Rates, Emerging Markets, Markets and Market Access, Macroeconomic Management
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
International Evidence on Tradables and Nontradables Inflation
-
By Matthew B. Canzoneri, Robert E. Cumby, ...
-
International Evidence on Tradables and Nontradable Inflation
-
Exchange Rates and Economic Fundamentals: A Methodological Comparison of Beers and Feers
By Peter B. Clark and Ronald Macdonald
-
Real Exchange Rates in the Developing Countries: Concepts and Measure- Ment
-
The EMS, the Emu, and the Transition to a Common Currency
By Kenneth Froot and Kenneth Rogoff
-
Real Exchange Rates and Productivity Growth in the United States and Japan
-
Asset Markets, Exchange Rates and the Balance of Payments
By Jacob A. Frenkel and Michael L. Mussa
-
By Enrique Alberola, Humberto Lopez, ...
-
Long-Run Exchange Rate Modeling: A Survey of the Recent Evidence