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Exchange Rate Pressure in Angola

NOVAFRICA working paper series
Francesco Franco

Nova School of Business and Economics and NOVAFRICA, Nova University of Lisbon

Júlio António Rocha Delgado

INOVE Research – Investigação & Desenvolvimento

Suzana Camacho Monteiro

BNA – Departamento de Estudos Económicos

Pedro Castro e Silva

BNA – Departamento de Estudos Económicos

ISSN 2183-0843
Working Paper No 1502
April 2015

Abstract

The objective of this work is to develop an operational tool to analyze exchange rate pressure in the context of Angola. The Angolan economy exhibits a number of relevant characteristics: a closed financial account, a partially controlled current account, a highly dollarized economy and exports (oil) price determined in World markets. These features have a direct effect on the demand of foreign currency and motivate their inclusion in the specification of a model for Angola. The model provides the rational for a measure of an exchange market rate pressure (EMP) index that contains exports changes, imports changes, the foreign interest rate and inflation and the change in foreign reserves corrected for a measure dollarization. The empirical performance new measure is comparable (slightly better) to the performance of the EMP indexes obtained in Eichengreen Rose and Wyplosz (1994) and Klassen and Jager (2011).

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