scholarly journals Exchange Rate Pass-Through to Unemployment in Sub-Saharan Africa: Evidence from Nigeria and South Africa

2020 ◽  
Vol 7 (3) ◽  
pp. 114-122
Author(s):  
Sunday Edesiri Akiri ◽  
Member Ahemen ◽  
John Abu
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Sub Saharan Africa ◽  
Sub Saharan ◽  
Pass Through ◽  
Exchange Rate Pass Through

Asymmetric impact of exchange rate pass-through into employees' wages in sub-Saharan Africa: panel non-linear threshold estimation

2020 ◽  
Vol 47 (7) ◽  
pp. 1629-1647
Author(s):  
Idris Abdullahi Abdulqadir ◽  
Soo Y. Chua
Keyword(s):  
Exchange Rate ◽  
Threshold Value ◽  
Sub Saharan Africa ◽  
Threshold Regression ◽  
Content Type ◽  
Non Linear ◽  
Marginal Propensity ◽  
Sub Saharan ◽  
Pass Through ◽  
Exchange Rate Pass Through

PurposeThe purpose of this article is to investigate the asymmetric impact of exchange rate pass-through (ERPT) on employees' wages via consumer prices in 15 major oil-exporting countries from sub-Saharan Africa over the period 1996-2017 using the panel threshold regression model.Design/methodology/approachThe methodology used in this article was built on non-linear panel threshold regression models developed by Hansen (1996, 1999) threshold regression. The authors first tested for the existence of threshold-effect in ERPT and wage nexus using 1,000 bootstrap replications and 400 grid searches to obtain an optimal threshold. We also estimated that asymmetric ERPT on employees' wages reacts differently when the inflation-threshold exceeds beyond a 15.12% threshold level.FindingsOur findings showed that asymmetric ERPT is incomplete and indicates that an increase by one standard deviation in real exchange rate causes a decline in employees' wages by 2.69%.Research limitations/implicationsThe policy implications of our results are drawn from the significant threshold estimates. However, a significant threshold value of 15.12 is an inflation-threshold estimates that split our 330 observations into the lower (upper) regimes. Further, an inflation rate beyond the threshold value is likely to have an asymmetric ERPT on employees' wages in the 15 major oil-exporting sub-Saharan African (SSA) countries.Practical implicationsThe practical implication of the study is when ERPT exceeds the threshold, the effect of real exchange rate variations is passed on to employees' wages. It is widely believed that labor productivity increase with increased minimum wages. Nevertheless, there is contention as regards the effects on employment and poverty. As rising goods prices make the minimum wage increased homogeneous of degree zero.Social implicationsConsiderable increased ERPT on imported goods reduces employees' wages purchasing ability from import-dependent countries through import prices. Once it has documented, this also reduces welfare via deteriorations of marginal propensity to consume (MPC) and marginal propensity to savings (MPS).Originality/valueThis article integrates labor purchasing power into the analysis of ERPT using non-linear dynamic panel heterogeneous threshold regression. It extends the Hansen (1996, 1999) dynamic panel threshold models to exchange rate pass-through in SSA economies.

scholarly journals Asymmetry in Exchange Rate Pass-Through to Consumer Prices: New Perspective from Sub-Saharan African Countries

Economies ◽  
2019 ◽  
Vol 7 (1) ◽  
pp. 5
Author(s):  
Diby François Kassi ◽  
Dilesha Nawadali Rathnayake ◽  
Akadje Jean Roland Edjoukou ◽  
Yobouet Thierry Gnangoin ◽  
Pierre Axel Louembe ◽  
...  
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regimes ◽  
Short Term ◽  
Franc Zone ◽  
Consumer Prices ◽  
Cfa Franc Zone ◽  
The Exchange Rate ◽  
Sub Saharan ◽  
Pass Through ◽  
Exchange Rate Pass Through

This paper examines the asymmetrical relationship between exchange rate and consumer prices in 40 sub-Saharan African (SSA) countries from 1990Q1 to 2017Q4. We estimate the exchange rate pass-through (ERPT) to consumer prices for each country by using the nonlinear autoregressive distributed lag (NARDL) framework and dynamic panel techniques robust to cross-sectional dependence. First, our findings suggest an asymmetrical ERPT in the SSA region during the short term, whereas there are mixed results across subregions in the long term. Second, the results of the panel analysis suggest incomplete and significant ERPT to consumer prices in the entire SSA region, which is higher during depreciation of the local currency than after appreciation in the short-term, especially in the CFA Franc zone. Third, we find nonlinear ERPT with respect to the size of the exchange rate. Finally, we find that pass-through is higher in countries with fixed exchange rate regimes (CFA franc zone) in a low inflationary environment than in countries with floating exchange rate regimes and high inflation levels. Pass-through is greater during large exchange rate changes than after small changes. Therefore, the policy implication is to consider these asymmetries and nonlinearities to improve monetary policy’s credibility, enhance trade liberalization, and promote competitive market structures in the SSA region.

EXCHANGE RATE PASS-THROUGH TO IMPORT PRICES IN SOUTH AFRICA: IS THERE ASYMMETRY?1

2009 ◽  
Vol 77 (3) ◽  
pp. 380-398 ◽  
Author(s):  
tapiwa d. karoro ◽  
meshach j. aziakpono ◽  
nicolette cattaneo
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Import Prices ◽  
Pass Through ◽  
Exchange Rate Pass Through

scholarly journals Asymmetry in Exchange Rate Pass-Through to Consumer Prices: New Perspective from Sub-Saharan African Countries

2018 ◽  
Author(s):  
Diby Francois Kassi ◽  
Gang Sun ◽  
Ding Ning ◽  
Akadje Jean Roland Edjoukou ◽  
Yobouet Thierry Gnangoin
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regime ◽  
Correlated Errors ◽  
African Countries ◽  
Consumer Prices ◽  
The Exchange Rate ◽  
Sub Saharan ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Ssa Countries

This paper examines the asymmetrical relationship between exchange rate and consumer prices in 40 Sub-Saharan African (SSA) countries from 1990q1 to 2017q4. The exchange rate pass-through (ERPT) to consumer prices is estimated for each country by using the nonlinear autoregressive distributed lags (NARDL) framework and dynamic panel estimators robust to cross-sectionally correlated errors. Firstly, our findings suggest an asymmetrical ERPT in the SSA region during the short-term, whereas there are mixed results across sub-regions in the long-term. Next, we find incomplete and significant ERPT to consumer prices in the entire SSA region which is higher during the depreciation of the local currency than after appreciations. Third, we find nonlinear ERPT with respect to the size of the exchange rate. The pass-through is higher during large exchange rate changes than after small changes.  Finally, we find that the pass-through is greater in the countries with fixed exchange rate regime (CFA franc zone) having low inflationary environment than in the other SSA countries with flexible exchange rate regime and high inflation levels. As a result, policymakers should take into account these asymmetries and non-linearities to improve the credibility of monetary policy, strengthen trade liberalization and establish competitive market structures in the Sub-Saharan region.

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