Exchange rate regimes and macroeconomic instabilities in Sub-Saharan Africa

This article addresses macroeconomic instabilities according to exchange rate regimes in Sub-Saharan Africa (SSA). Based on International Monetary Fund's exchange rate regimes de facto classification, the global sample, SSA, is first divided into two subsamples, which are countries within CFA franc zone (ZCFA) and those outside CFA franc zone (HZCFA), and then into four categories, which are the Western Economic and Monetary Union (WAEMU), the Central African Economic and Monetary Community, the countries CFA franc zone with fix exchange rate regimes(HZCFA-FIX), and the countries outside CFA franc zone with flexible exchange rate regimes(HZCFA-FLEX). By applying advanced statistical and econometric methods upon internal and external macroeconomic equilibrium conditions, we show that the inflation, the GDP (or the output) and the real exchange rate (RER) are very volatile in SSA. However, we found out that they are more volatile in the group HZCFA comparatively to the group ZCFA. We also found out that they are higher in the group HZCFA-FIX than the group HZCFA-FLEX. Moreover, we found out that a high instability of the inflation is combined with those of the output and the RER.