Impact of real exchange rate fluctuations on aggregate cocoa and coffee exports in Sierra Leone
The regression and the vector autoregressive VAR models have been employed in this analysis. I use the autodistributed lag regression model to estimate both the short and the long-run impacts. In the VAR model, orthogonalized impulse response functions are employed to estimate the short-run. The regression result shows that while depreciation of the RER increases aggregate cocoa and coffee exports AGX in the current year, this variable is not significant in determining AGX in Sierra Leone. This is due to the fact that AGX have long gestation periods and until this period is over, suppliers cannot actually raise their output and hence exports. The negative effect of the one period lag of RER variable on AGX can be attributed to the fact that in the long run, depreciation in the nominal exchange rate leads to real exchange rate depreciation. This will lead to increase in cost of imported farming inputs in domestic currency terms. The reduction in imports that follows decreases the output and hence cocoa and coffee exports. However, this variable is not significant in determining AGX in Sierra Leone. An increase in the orthogonalized shock to the first difference of log RER causes a short series of increases in first difference of log AGX followed by a decrease, followed by an increase that dies out after four periods. The null hypothesis that the lag of first difference of log RER does not Granger-cause the lag of first difference of AGX cannot be rejected. The paper concluded that in the short and long-run, the RER should not be taken as policy variable to influence AGX in Sierra Leone.
Copyright (c) 2020 Pabai Fofanah
This work is licensed under a Creative Commons Attribution 4.0 International License.
Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of a revised paper in the light of suggestions of the reviewers, editorial team edits and formats manuscripts to bring uniformity and standardization in published material.
This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.