MORO KADJO DANIEL BITTY, 041217037311 (2016) EXCHANGE RATE REGIME FOR MACROECONOMIC PERFORMANCE: LESSONS FROM REGIONAL INTEGRATED AREAS IN SOUTHEAST ASIA (ASEAN-10) AND WEST AFRICA (ECOWAS-15). Disertasi thesis, UNIVERSITAS AIRLANGGA.

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Abstract

This dissertation shows that, nowadays, the exchange rate appears to be the single monetary tool that can be used to simultaneously boost economic growth and protect national or regional economic fundamentals against adverse external shocks, but how? That’s the question which constitutes the major concern of this study. Using secondary macroeconomic data for the period 1990-2014, this research has adopted a mixed-methodology approach based on correlation tests and statistical mapping technique analyses. Indeed, it is a systematic descriptive and comparative study that aims to comprehend the factual correlation between exchange rate and five macroeconomic performance indicators namely: GDP growth, inflation, foreign direct investment, unemployment rate and current account balance of twenty five countries from two regional integrated areas which are the Association of Southeast Asian Nations (ASEAN-10) and Economic Community of West African States (ECOWAS-15). The major findings of this dissertation are firstly: we have learned that under floating exchange rate regime, a low GDP growth appears to be the cost of a successful inflation targeting; and to avoid that tradeoff between inflation and GDP growth, “qualitative easing” policies are suggested. On the other hand, currency pegged regime fits well “Externally Oriented Economies” like Singapore and most small economies of ECOWAS. Also, in countries under floating exchange rate regimes, the FDI is high but very cyclical due to the ability of investors to freely move their capital while in countries under fixed exchange rate regimes the FDI is lower but stable over time. Hence, we propose new formulations of the exchange rate valuation named: the “Inclusive Nominal Exchange rate” (INEX) and “Commodity Nominal Exchange rate” (CNEX) which are both based on real economic performances of countries and the structure of their economies. Finally, this research provides an illustration of the INEX which showed that in 2014, the Indonesian “inclusive exchange rate” was estimated at 10.524 while the nominal exchange rate was near 12.000. This means that the macroeconomic fundamentals of Indonesia were better but, the nominal exchange rate failed to capture that performance. In short, rethinking the exchange rate regime strategy is a necessity and it should be used as a major instrument in open economies according to the structure of their economies and their macroeconomic objectives.

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