Currency substitution in selected African countries

Purpose - This paper aims to investigate the presence of currency substitution in eight African countries.Design methodology approach - This study investigates the presence of currency substitution in eight African countries - Egypt, Morocco, Nigeria, Ghana, Kenya, South Africa, Tunisia and Zambia -...

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Bibliographic Details
Published in:Journal of economic studies (Bradford) 2009-10, Vol.36 (6), p.616-640
Main Authors: Désiré Adom, Assandé, Sharma, Subhash C., Mahbub Morshed, A.K.M.
Format: Article
Language:English
Subjects:
Africa
American dollar
Currencies
Currency
Currency options
Currency substitution
Deficit financing
Dollar
Economic analysis
Economic theory
Egypt
Floating exchange rates
Foreign exchange rates
Ghana
Inflation
Interest rates
Kenya
Monetary policy
Money supply
Morocco
Nigeria
South Africa
Studies
Supply & demand
Supply and demand
Tunisia
Zambia
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Summary:Purpose - This paper aims to investigate the presence of currency substitution in eight African countries.Design methodology approach - This study investigates the presence of currency substitution in eight African countries - Egypt, Morocco, Nigeria, Ghana, Kenya, South Africa, Tunisia and Zambia - for the period 1976 to 2005 using both regional and US dollar as anchor currencies.Findings - The paper finds that currency substitution is prevalent in Ghana and Nigeria when CFA franc is used as an anchor currency. However, when US dollar is used as an anchor currency there is no evidence of currency substitution in Ghana, but the presence of currency substitution in Nigeria is still observed. The paper also finds the presence of currency substitution in South Africa, but not in Egypt when the US dollar is the anchor currency. For Kenya, Tunisia and Zambia there is no evidence of currency substitution irrespective of the anchor currencies considered. In the case of Morocco, no evidence of currency substitution is observed when the Egyptian pound is used as anchor currency, but there is weak evidence of currency substitution when the US dollar is considered.Originality value - This paper provides useful information on the presence of currency substitution in African countries.
ISSN:0144-3585
1758-7387
DOI:10.1108/01443580911001760