REAL EXCHANGE RATE AND ECONOMIC GROWTH DYNAMICS IN THREE EASTERN AFRICAN COUNTRIES: AN EXPLORATORY REVIEW

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Abstract

This paper provides an overview of the dynamics of real exchange rate and economic growth in three Eastern African countries since 1960. In particular, the paper investigates the nature of exchange rate regimes and the impact that they have on economic growth, as well as the movement of real exchange rates and real GDP from 1970—2010 in these countries. The common trends identified were as follows: These countries pursued fixed exchange regimes from the 1960s until the late 1980s and early 1990s, which repressed their economic growth; the countries pursued floating and managed floating regimes from the 1990s to date, resulting in moderate-to-rapid economic growth. We conclude that liberalised exchange rates, which lead to undervalued currencies in these Eastern African countries, are growth-enhancing.

Keywords: Eastern Africa, Economic Growth, Low Income, Real Exchange Rate

How to cite this paper: Iyke, B. N., & Odhiambo, N. M. (2014). Real exchange rate and economic growth dynamics in three Eastern African countries: an exploratory review. Corporate Ownership & Control, 11(4-7), 616-624. https://doi.org/10.22495/cocv11i4c7p4