A new working paper has been added to the NOVAFRICA Working Paper Series.
Written by Francesco Franco, Júlio António Rocha Delgado, Suzana Camacho Monteiro and Pedro Castro e Silva, this paper analyzes exchange rate pressure in Angola.
Exchange rate pressure in Angola
Francesco Franco, Júlio António Rocha Delgado, Suzana Camacho Monteiro and Pedro Castro e Silva
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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