EXCHANGE RATE REGIME FOR MACROECONOMIC PERFORMANCE: LESSONS FROM REGIONAL INTEGRATED AREAS IN SOUTHEAST ASIA (ASEAN-10) AND WEST AFRICA (ECOWAS-15)
DISSERTATION EXCHANGE RATE REGIME FOR MACROECONOMIC PERFORMANCE: LESSONS FROM REGIONAL INTEGRATED AREAS
DISSERTATION EXCHANGE RATE REGIME FOR MACROECONOMIC PERFORMANCE: LESSONS FROM REGIONAL INTEGRATED AREAS
DISSERTATION EXCHANGE RATE REGIME FOR MACROECONOMIC PERFORMANCE: LESSONS FROM REGIONAL INTEGRATED AREAS
EXCHANGE RATE REGIME FOR MACROECONOMIC PERFORMANCE: LESSONS FROM REGIONAL INTEGRATED AREAS
This Dissertation has been submitted and successfully evaluated by the Board of Examiners for the Award of a Doctoral Degree in Economics at the Faculty of Economics and Business in Universitas Airlangga
On Wednesday, June 1, 2016 Time: 10am-12pm By:
MORO KADJO DANIEL BITTY NIM : 041217037311
APPROVAL SHEET BY THE BOARD OF EXAMINERS
This Dissertation has been examined and approved by the Board of Examiners through a Closed-door Examination at the Faculty of Economics and Business of Universitas Airlangga in February 23
rd , 2016.
BOARD OF EXAMINERS:
Head: Prof. Dr. Djoko Mursinto, SE., M.Ec Members:
1. Dr. Rudi Purwono
2. Prof. Dr. Agus Suman, SE., DEA 3. Dr. H. Kasturi Sukiadi, SE.
4. Dr. Lilik Sugiharti 5. Dr. Wisnu Wibowo, SE., M.Si.
6. Dyah Wulansari, Dra.Ec., M.Ec.Dev.,PhD Ditetapkan Dengan Surat Tugas Pimpinan
Fakultas Ekonomi dan Bisnis Universitas Airlangga Nomor : 644/UN3.1.4/PP/2016
Tanggal : 15 Februari 2016
ACKNOWLEDGEMENTS
The Ph.D. research also called dissertation is an academic journey that rewards a student with a doctoral Degree when actually, it was a teamwork that achieved it. That is the reason why, first and foremost, I would like to express my heartfelt gratitude to my dissertation Supervisors: Prof. Dr. Djoko Mursinto, Dr.
Unggul Heriqbaldi and Dr. Rudi Purwono from Airlangga University. Thanks
to you for providing me the opportunity to do such a research under your guidance and meaningful instructions about the delicate mixed-methodology analysis that I have used to answer monetary issues. I have been so lucky and blessed to be learning by their sides. Prof. Djoko and Dr. Rudi Purwono have shared with me almost everything that could help me comprehend the complexity of monetary policies. Their time, books, journals, personal experiences, etc. will never be forgotten. I deeply thank you also for giving me “space and free time” so that I could work honestly, deeply and creatively on my dissertation. Terima Kasih Pak!
In addition, I would like to tell my deep gratitude to the Board of Examiners namely Prof. Dr. Agus Suman, SE., DEA as the outside Examiner, Prof. Dr.
Djoko Mursinto, SE., M.Ec, Dr. Unggul Heriqbaldi, Dr. H. Kasturi Sukiadi, SE., Dr. Rudi Purwono, Dr. Lilik Sugiharti, Dr. Wisnu Wibowo, SE., M.Si. and Dr. Dyah Wulansari who took time to read my proposal and dissertation; their
idealisms and meaningful inputs have brought me to this academic achievement.
Terima Kasih.
Besides the Supervisors of my research who were my references from the academic point of view, the beginning and completion of this Ph.D. project have been possible thanks to the Republic of Indonesia (RI) for granting the
Scholarship “Beasiswa Unggulan” through the Ministry of Education and
Researches, the Immigration Department and their Representatives at the Embassy of Indonesia in Dakar, particularly His Excellence Ambassador Indra Djati, Pak
Rheinhard Sinaga, Ibu Elis, Pak Abdul Ghofar and Ibu Ayu.
I owe a special thanks to Ibu Ayu Suryawati, a Great Lady who, from the very beginning, was the first to call me when I was still in Africa, Cote d’Ivoire, and invited me to apply for a scholarship: “Beasiswa Unggulan” which has brought me to this achievement. Thank you so much Dear Ibu Ayu! Actually, while I am writing these thanksgiving words, I realize that the “Acknowledgement”, as part of the dissertation, is a reminder of every step of the journey, all the challenging and enjoyable moments. Looking backward, it is a great pleasure for me to remember and acknowledge the assistance and contributions of many individuals in making this part of my life a success. Indeed, there are three groups of people and institutions that I wish to express my sincere gratitude.
I am grateful to “those who were there with me, from the very beginning”, when this Ph.D. project was just an infant dream. - To “La Fondation Benianh International” and its Chairman Noel Akossi Benjo, the Managers Sylviane Fontaine and Bitty Kokora Pierre for making my first educational trip abroad come true.
To “ISM Dakar” and its President Amadou Diaw, for the connection - built with the Indonesian Embassy through Dr. Diane Abdoulaye. Merci infiniment à vous! The second group of persons that I am pleased to tell my immense gratitude is “the Academics of Airlangga University”. - To the Rectorate of Universitas Airlangga, the Academic Director Prof. Dr. Ni Nyoman Tri Puspaningsih, Ibu Lilik, Ibu Diah Prihatiningsih, the International Office for Partnership (IOP), Pak Jalal, and the Faculty of Economics and Business for making my integration to “Keluarga Airlangga” a meaningful and joyful moment. - To the staff of my University, I thank you for being so understanding by allowing my presence in the Library until late in the night. Thank you Pak Bustani and Dr. Wisnu Wibowo for the books generously shared. - To my Teachers and Lecturers, especially the Dean of the Faculty of Economics and Business Prof. Dr. Dian Agustia, and Dr. Rudi, Dr. Ibu Rahma,
Pak Dr. Soekarnoto, Dr. Winifred Lydia Wirkus and Dr. H. Kasturi Sukiadi
for giving me the chance to teach “Philosophy of economics” at the Master’s Program; it was a unique experience, a learning process that enables me to overpass my comfort zone.
To Pak Edy Purwanto, Pak Nashrudin Latif, Mbak Indah, Mas - Rizal, Indra, Mbak Dewi, Mbak Pratiwi, Mas Suroto (Printing Enterprise,
Centro), and those Anonymous who were always willing to help me. Thank you!
- - To my colleagues and classmates Pak Aris, Ibu Lucky, Juliana,
Ibu Alwiyah, Pak Sjamsul, Ibu Tia, Ibu Bagas and my friends Daniela Tello, Caro, Hubert, Luciana, Miguel, Toma, Archil, Tanty, Pak Bayu, Yudi, Zoltan,
Lydia, Ice, Retno and especially Michel Tanguay for sparing their time to discuss economic issues whenever I needed external perspectives. Lastly, the third group of people that I will always be indebted to is “those who
gave me the Energy, Trust and Love” that kept me standing firm during
difficult times of my studies. I remember when I first arrived in Indonesia with the dream of obtaining a Doctoral Degree from the largest ASEAN economy, I had just two hundreds dollar in my pocket, and no savings. I was aware that it wouldn’t be an easy way to go through because my scholarship could only cover the tuition fees. BUT, today I can make that dream become reality thanks to the following persons:
- - To my Dear Father and my mentors Bitty Kokora Pierre, Beugre
Yao Claude, Dr. Kipre Momele from the Central Bank of West African States
(BCEAO), N’guessan Bitty Blaise (RIP), Bouga Roger and Grand-Ma,
Olivier Konan, Mado, Veronique, Jean-Baptiste, Arnaud Bitty, Olivier Moro, Kouassi Etien Lazare and Edouard Nsimba for their support and other
economic journals and articles shared. Merci beaucoup!
- - Special mention goes to my enthusiastic and very kind friends
Francisco alias Panchito, Madre and Padre Julio, John, Nelson, Dianita and
many more who sponsored my memorable academic trip to Chile in June 2014, at Universidad Tecnica Frederico Santa Maria (UTFSM) and TINET Company. I have certainly left my heart there in Santiago and Valparaiso... Muchos Gracias for showing me the power and beauty of Friendship. Without your encouragement and guidance this project would not have materialized on time. - Similar, profound gratitude goes to Ibu Herry, Pak Herry, Ibu Budi,
Pak dr. Budi, Donny, Putri, Reza, Rike and Bimo who received me in there
house in Surabaya, as a member of their family. Indeed, I was home. Terima kasih, semoga Tuhan selalu memberkati kalian! To Pak Freddy and Ibu Priska Pangkey the Director of -
ADICITRA, I would like to tell my deepest gratitude. I can’t say thank you
enough for their tremendous support and help. I feel motivated and encouraged every time we meet. I have so many things to say to you both but, only one word remains: MERCI! - Thanks to Pak Dr. Kresnayana Yahya as well for the emails shared and data about ASEAN-10 economies. - Last but not least, to my “Aussie mum”, Mrs. Maria Bartholomew, her smart daughter J-A, and Peter from Sydney, I am grateful for their constant support and help, especially in reviewing the syntax of my dissertation. Thank you all for giving me the chance to learn from you and improve myself. Thanks to God “the Invisible Hand” for keeping me safe until now.
Thank you INDONESIA!
SUMMARY
This dissertation shows that, nowadays, the exchange rate appears to be the single monetary tool that can be used to simultaneously boost economic growth and protect national or regional economic fundamentals against adverse external shocks, but how? That’s the question which constitutes the major concern of this study. Using secondary macroeconomic data for the period 1990-2014, this research has adopted a mixed-methodology approach based on correlation tests and statistical mapping technique analyses. Indeed, it is a systematic descriptive and comparative study that aims to comprehend the factual correlation between exchange rate and five macroeconomic performance indicators namely: GDP growth, inflation, foreign direct investment, unemployment rate and current account balance of twenty five countries from two regional integrated areas which are the Association of Southeast Asian Nations (ASEAN-10) and the Economic Community of West African States (ECOWAS-15). The major findings of this dissertation are firstly: we have learned that under floating exchange rate regime, a low GDP growth appears to be the cost of a successful inflation targeting policy; and to avoid that tradeoff between inflation and GDP growth, “qualitative easing” policies are suggested. On the other hand, currency pegged regime fits well “Externally Oriented Economies” like Singapore and most of the small economies of ECOWAS. Also, in countries under floating exchange rate regimes, the FDI is high but very cyclical due to the ability of investors to freely move their capital while in countries under fixed exchange rate regimes the FDI is lower but stable over time. Hence, we propose new formulations of the exchange rate valuation named: the “Inclusive Nominal Exchange rate” (INEX) and “Commodity
Nominal Exchange rate” (CNEX) which are both based on real economic
performances of countries and the structure of their economies. Finally, this research provides an illustration of the INEX which showed that in 2014, the Indonesian “inclusive exchange rate” was estimated at 10,524 while the nominal exchange rate was near 12,000. This means that the macroeconomic fundamentals of Indonesia were better but, the nominal exchange rate failed to capture that performance. In short, rethinking the exchange rate regime strategy is a necessity and it should be used as a major instrument in open economies according to the structure of their markets and their macroeconomic objectives. In fact, a “new
monetary era” is emerging due to the greater openness of economies, the
increasing influence of regional economic blocks and the global industrial value- chains that creates an interconnected global market. Clearly, exchange rate has become a more effective monetary tool than the interest rate was. Indeed, for more than seven years of “quantitative easing” policy applied by the United States and followed by European countries, the failure of the interest rate as a monetary instrument used to address fundamental economic issues is so palpable. In short, this dissertation is expected to open a new window of discussions about the responsibility of governments and monetary authorities as the guarantor of the value of money which currently is based on nothing but a mere game played by the actors of a supposedly free-market.
Abstrak (Indonesian Language)
Disertasi ini menunjukkan bahwa, saat ini, nilai tukar tampaknya menjadi alat moneter tunggal yang dapat digunakan untuk secara bersamaan meningkatkan pertumbuhan ekonomi dan melindungi fundamental ekonomi nasional atau regional terhadap guncangan eksternal, tapi bagaimana caranya? Pertanyaan itulah yang merupakan perhatian utama dari penelitian ini. Dengan menggunakan data makroekonomi sekunder untuk periode 1990-2014, penelitian ini telah mengadopsi pendekatan mix-metodologi berdasarkan tes korelasi dan teknik pemetaan. Tulisan ini menganalisa korelasi faktual antara nilai tukar dan lima makroekonomi variabel yaitu pertumbuhan PDB, inflasi, investasi asing langsung, tingkat pengangguran dan neraca perdagangan. Di sini, kita belajar dari dua puluh lima negara berasal dari dua Kawasan Ekonomi yaitu ASEAN-10 dan Masyarakat Ekonomi Negara Afrika Barat (ECOWAS-15) dengan masing masing rezim nilai tukar yang sangat beragam. Penelitian ini adalah studi deskriptif dan komparatif yang bertujuan untuk memahami secara sistematis saluran transmisi antara nilai tukar dan kelima indikator kinerja makroekonomi tersebut. Temuan-temuan utama dari disertasi ini adalah pertama: di bawah rezim kurs mengambang bebas, pertumbuhan PDB yang rendah tampaknya menjadi biaya kesuksesan inflasi yang terkendali rendah; dan untuk menghindari tradeoff tersebut antara inflasi dan pertumbuhan PDB, "pelonggaran kualitatif" adalah kebijakan yang disarankan di studi ini. Di sisi lain, rezim nilai tukar tetap cocok dengan "External Oriented Economies" seperti Singapura dan kebanyakan Negara di ECOWAS. Juga, di negara-negara di bawah rezim nilai tukar mengambang, investasi asing langsung sangat tinggi tapi sangat siklis karena kemampuan investor untuk dengan bebas memindahkan modal mereka; sementara di negara-negara di bawah rezim nilai tukar tetap investasi asing langsung menjadi lebih rendah tapi stabil dalam jangka panjang. Oleh karena itu, kami mengusulkan formulasi baru dari penilaian nilai tukar yang bernama: yang "Inclusive Nominal Exchange rate" (INEX) dan "Commodity Nominal Exchange rate" (CNEX) yang mana penilaiannya didasarkan pada kinerja ekonomi riil negara dan struktur ekonomi mereka. Akhirnya, penelitian ini memberikan ilustrasi dari INEX yang menunjukkan bahwa pada tahun 2014, "nilai tukar inklusif" Indonesia menguat sampai 10524 terhadap US dollar sedangkan nilai tukar nominal saat itu mendekati 12000. Itu berarti bahwa fundamental makroekonomi Indonesia sudah membaik, namun kurs nominal gagal menangkap kinerja tersebut. Singkatnya, memikirkan kembali strategi rezim nilai tukar adalah suatu keharusan dan harus digunakan sebagai sebuah instrumen utama di negara-negara terbuka sesuai struktur ekonomi dan tujuan makro ekonomi mereka.
Kata kunci: Kawasan Ekonomi Regional, kebijakan nilai tukar, kinerja ekonomi,
"Inclusive Nominal Exchange rate" (INEX) dan " Commodity Nominal Exchange rate" (CNEX).
Résumé (French) Cette thèse montre que, de nos jours, le taux de change semble être l'unique outil monétaire qui peut être utilisé pour simultanément stimuler la croissance économique et protéger les fondamentaux économiques nationaux ou régionaux contre les potentiels chocs externes, mais comment? Telle est la question qui constitue la préoccupation majeure de cette étude. En utilisant les données macro- économiques secondaires durant la période 1990-2014, cette recherche a adopté une approche méthodologique mixte basée sur des tests de corrélation et technique statistique de cartographie. En effet, il s’agit d’une étude descriptive et comparative systématique qui vise à comprendre la corrélation factuelle entre le taux de change et des cinq indicateurs de performance macro-économiques à savoir: la croissance du PIB, l'inflation, l'investissement direct étranger, le taux de chômage et la balance commerciale des vingt-cinq pays de l'Association des Nations d’Asie du Sud-Est (ANASE-10) et la Communauté Economique des Etats de l'Afrique de l'Ouest (CEDEAO-15). Les principales conclusions de cette thèse sont entre autre: sous le régime de change flottant, une faible croissance du PIB semble être le coût d'une inflation contrôlée. Ainsi pour éviter ce choix difficile entre l'inflation et la croissance du PIB, les politiques «d'assouplissements qualitatifs" sont suggérées. D'autre part, les régimes fixes ou d’arrimage de monnaies semblent bien adaptées aux "économies orientées vers l'extérieur" comme Singapour et la plus part des économies de la CEDEAO. En outre, dans les pays sous les régimes de change flottants, l'investissement direct étranger est élevé, mais très cyclique en raison de la capacité des investisseurs à déplacer librement leur capitaux alors que dans les pays soumis à des régimes de change fixes, l'investissement direct étranger est plus faible mais assez stable sur le long terme. Par conséquent, nous proposons de nouvelles formulations du taux de change dont le nom serait : le “Inclusive Nominal Exchange rate” (INEX) et le “Commodity Nominal Exchange rate” (CNEX) qui ont tous deux leurs valeurs basées sur les performances économiques réelles et la structure de leurs économies. Enfin, cette thèse offre une illustration du “INEX” qui montre qu’en
2014, le “taux de change inclusif” Indonésien devait apprécier et être estimer à 10.524 alors que le taux de change nominal par rapport au dollar Américain avoisinait 12.000. Cela signifie que les fondamentaux macroéconomiques de l'Indonésie s’étaient améliorés, mais le taux de change nominal a manqué de prendre compte cette performance. En bref, repenser la stratégie liée au choix du
régime de change est une nécessité et cela doit être utilisé en tant qu’un instrument majeur dans les économies ouvertes, en tenant compte bien sûr de leurs structures économiques et objectifs macroéconomiques.
Mots-clés: Intégration économique régionale, les politiques de taux de change, la performance économique, taux nominal de change inclusive (INEX) et taux de change nominal de commodité (CNEX).
Abstract
This dissertation shows that, nowadays, the exchange rate appears to be the single monetary tool that can be used to simultaneously boost economic growth and protect national or regional economic fundamentals against adverse external shocks, but how? That’s the question which constitutes the major concern of this study. Using secondary macroeconomic data for the period 1990-2014, this research has adopted a mixed-methodology approach based on correlation tests and statistical mapping technique analyses. Indeed, it is a systematic descriptive and comparative study that aims to comprehend the factual correlation between exchange rate and five macroeconomic performance indicators namely: GDP growth, inflation, foreign direct investment, unemployment rate and current account balance of twenty five countries from two regional integrated areas which are the Association of Southeast Asian Nations (ASEAN-10) and Economic Community of West African States (ECOWAS-15). The major findings of this dissertation are firstly: we have learned that under floating exchange rate regime, a low GDP growth appears to be the cost of a successful inflation targeting; and to avoid that tradeoff between inflation and GDP growth, “qualitative easing” policies are suggested. On the other hand, currency pegged regime fits well “Externally Oriented Economies” like Singapore and most small economies of ECOWAS. Also, in countries under floating exchange rate regimes, the FDI is high but very cyclical due to the ability of investors to freely move their capital while in countries under fixed exchange rate regimes the FDI is lower but stable over time. Hence, we propose new formulations of the exchange rate valuation named: the “Inclusive Nominal Exchange rate” (INEX) and “Commodity
Nominal Exchange rate” (CNEX) which are both based on real economic
performances of countries and the structure of their economies. Finally, this research provides an illustration of the INEX which showed that in 2014, the Indonesian “inclusive exchange rate” was estimated at 10.524 while the nominal exchange rate was near 12.000. This means that the macroeconomic fundamentals of Indonesia were better but, the nominal exchange rate failed to capture that performance. In short, rethinking the exchange rate regime strategy is a necessity and it should be used as a major instrument in open economies according to the structure of their economies and their macroeconomic objectives.
Keywords: Regional Economic Integration, Exchange rate policies, Economic
performance, Inclusive Nominal Exchange Rate (INEX) and Commodity Nominal Exchange rate (CNEX).
CONTENTS Pages st
1 Title Page .…...……………………………………………..……............. i
nd
2 Title Page ………………………………………………........…………… ii
rd
3 Title Page …………………………………...…………………..………… iii Submission of Dissertation .………………………………………...………… iv Approval Sheet …...……………………………………………....................... v Approval Sheet by the Board of Examiners ...................................................... vi Declaration / Pernyataan ……..……………………………………................ vii
Acknowledgements …………..………………………………………………. viii Summary ………………..………………………………………….....………. xi
Abstrak (Indonesian Language) …………………………………….…..……. xii Résumé (French) ……………………………………………………..………. xiii Abstract .............................................................................................................. xiv
Contents ………………………………………………………………........…. xv List of Tables …………………………………………………………………. xxiii List of Figures ………………………………………………………………… xxv Abbreviations ................................................................................................. xxxviii
CHAPTER 1: INTRODUCTION…………………………………………….
1 1.1 Preface………………………………………………………................
1 1.2 Statement of the Problem……………………………………………..
6
1.3 Research Questions……………………………………………………
18 1.4 Objectives of the Research…………………………………………….
19
1.5 Benefits and Novelty of the Research…………………………………
21 CHAPTER 2: LITERATURE REVIEW……………........………………….
23 2.1 Theories of Money……………………………………………………..
23 2.2 Types of Exchange rate regime ……………………………………….
27 2.2. 1 Fixed Exchange Rate Regimes ………………………………
29 2.2. 2 Floating Exchange Rate Regimes…………………………….
37
2.3 Critical literature on Exchange Rate and Macroeconomic Performance ………………………………………………………………
40 2.3.1 Exchange Rate and GDP growth according to the literature ...
41 2.3.2 Exchange Rate and Inflation according to the literature…......
44
2.3.3 Exchange Rate and Foreign Direct Investment according to
46 the literature…………………………………………………………
2.3.4 Exchange Rate and Unemployment according to the literature
50
2.3.5 Exchange Rate and trade balance according to the literature…
52 2.4 Regional Integration theories………………………………………….
56
2.4.1 Brief view of the Association of Southeast Asian Nations (ASEAN-10) ......................................................................................
62
2.4.2 Brief view of the Economic Community of West African States (ECOWAS-15)……………………………………………….
64
CHAPTER 3: CONCEPTUAL FRAMEWORK AND HYPOTHESES ......
65 3.1 Conceptual Framework………………………………………………..
65
3.2 Logical Framework……………………………………………………
74
3.3 Hypotheses of the research……………………………………………
76 CHAPTER 4: RESEARCH METHOD………………………………………
78 4.1 Type of Research……………………………………………………...
78 4.2 Place and Time frame of the Research………………………………...
79 4.3 Data Collection………………………………………………………..
80 4.4 Identification of variables ……………………..……………………..
81 4.4.1 The Exchange Rate ..............................................................….
81 4.4.2 The Gross Domestic Product (GDP) growth .............………...
82 4.4.3 The Inflation rate .............................................………………..
82 4.4.4 The Foreign Direct Investment (FDI) ...…………………...….
82 4.4.5 The Unemployment rate ............................................................
83 4.4.6 The Current Account Balance or Trade Balance ......……….
83 4.5 Operational variables ……………………..……………………..
84 4.5.1 The Exchange Rate ..............................................................….
84 4.5.2 The Gross Domestic Product (GDP) growth .............………...
85
4.5.3 The Inflation rate .............................................………………..
) in ASEAN-10 Countries (1990-2014) ...................................................
) and Foreign Direct Investment (y i ) in ASEAN-10 Countries (1990-2014) .....................
i
5.1.3 Correlation Test of Exchange rate (x
100
) in ASEAN-10 Countries (1990-2014) ..............................................
i
) and Inflation rate (y
i
5.1.2 Correlation Test of Exchange rate (x
98
i
85 4.5.4 The Foreign Direct Investment (FDI) ...…………………...….
) and GDP growth (y
i
5.1.1 Correlation Test of Exchange rate (x
5.1 Testing the Hypotheses for ASEAN-10 Countries from 1990-2014 .... 97
91 CHAPTER 5: DATA ANALYSIS AND RESULTS ....................................... 97
87 4.6.2 The Mapping Technique .................................................. ..…..
87 4.6.1 The Pearson’s Correlation Test ...............…………………......
87 4.6 Data Analysis Techniques…………………………………………….
86 4.5.6 The Current Account Balance or Trade Balance ......……….
85 4.5.5 The Unemployment rate ............................................................
103
5.1.4 Correlation Test of Exchange rate (x i ) and Unemployment rate (y ) in ASEAN-10 Countries (1990-2014) ................................. 106
i
5.1.5 Correlation Test of Exchange (x ) rate and Current Account
i
109 Balance (y i ) in ASEAN-10 Countries (1990-2014) ..........................
5.2 Testing the Hypotheses for ECOWAS-15 from 1990-2014 ................. 115
5.2.1 Correlation Test of Exchange rate (x i ) and GDP growth (y i ) in 116 ECOWAS-15 Countries (1990-2014) ...............................................
5.2.2 Correlation Test of Exchange rate (x i ) and Inflation rate (y i ) 118 in ECOWAS-15 Countries (1990-2014) ...........................................
5.2.3 Correlation Test of Exchange rate (x ) and the Foreign Direct
i Investment (y ) in ECOWAS-15 Countries (1990-2014) .................. i
121
5.2.4 Correlation Test of Exchange rate (x ) and Unemployment
i rate (y i ) in ECOWAS-15 Countries (1990-2014) ..............................
124
5.2.5 Correlation Test of Exchange rate (x i ) and Current Account Balance (y i ) in ECOWAS-15 Countries (1990-2014) .......................
127
CHAPTER 6: INTERPRETATION OF THE RESULTS ............................. 136
137 6.1 Interpretation of the correlation map in ASEAN-10 ..........................
6.1.1 Interpretation of the correlation between exchange rate and GDP growth in ASEAN-10 .............................................................
140
6.1.2 Interpretation of the correlation between exchange rate and Inflation in ASEAN-10 ...................................................................
164
6.1.3 Interpretation of the correlation between exchange rate and the FDI in ASEAN-10 .....................................................................
180
6.1.4 Interpretation of the correlation between exchange rate and Unemployment in ASEAN-10 ........................................................
217
6.1.5 Interpretation of the correlation between exchange rate and the current account balance in ASEAN-10 .....................................
231
6.2 Interpretation of the correlation map in ECOWAS-15 ....................... 246
6.2.1 Interpretation of the correlation between exchange rate and GDP growth in ECOWAS-15 .........................................................
248
6.2.2 Interpretation of the correlation between exchange rate and Inflation in ECOWAS-15 ................................................................
275
6.2.3 Interpretation of the correlation between exchange rate and the FDI in ECOWAS-15 .................................................................
284
6.2.4 Interpretation of the correlation between exchange rate and Unemployment in ECOWAS-15 .....................................................
302
6.2.5 Interpretation of the correlation between exchange rate and the current account balance in ECOWAS-15 ..................................
313
6.3 Lessons learned from the differences and similarities between ASEAN-10 and ECOWAS-15 exchange rate policies .............................
328
6.3.1 Lessons learned from the correlation between Exchange rate and GDP...........................................................................................
328
6.3.2 Lessons learned from the correlation between Exchange rate and Inflation ....................................................................................
335
6.3.3 Lessons learned from the correlation between Exchange rate and FDI ...........................................................................................
336
6.3.4 Lessons learned from the correlation between Exchange rate and Unemployment .........................................................................
337
6.3.5 Lessons learned from the correlation between Exchange rate and Trade Balance ...........................................................................
338
CHAPTER 7: CLOSING .................................................................................. 345
7.1 Conclusion ............................................................................................ 345
7.2 Recommendations ............................................................................... 348
7.2.1 A clear vision and long term commitment ............................... 348
7.2.2 Yes to short term monitoring but with a long term communication strategy ....................................................................
348
7.2.3 A new formulation of exchange rate that promotes stability and inclusive economic growth for large countries (INEX-illustration) ............................................................................
349
7.2.4 More specialization for better integration (CNEX-illustration) 350
7.2.5 Solution for inclusive employment under regional integration framework .........................................................................................
351 7. 3 Limitations and Further Researches .................................................... 352
REFERENCES ..................................................................................................... 354 ENDNOTES………………………………………………………………......… 359
List of Tables
Table 2.1: Recapitulation of the Correlation between Exchange Rate and GDP, Inflation, FDI, Unemployment and Trade Balance according to theories …...…
59 Table 2.2: The difference between Regionalism and Regionalization …………
62 Table 5.1.1: Results of the correlation test between exchange rate and GDP growth in ASEAN-10, 1990-2014 .......................................................................
98 Table 5.1.2: Results of the correlation test between exchange rate and inflation in ASEAN-10, 1990-2014 .................................................................................... 100 Table 5.1.3: Results of the correlation test between exchange rate and FDI in
103 ASEAN-10, 1990-2014 ........................................................................................ Table 5.1.4: Results of the correlation test between exchange rate and unemployment in ASEAN-10, 90-2014 ............................................................... 106 Table 5.1.5: Results of the correlation test between exchange rate and trade
109 balance in ASEAN-10, 90-2014 .......................................................................... Table 5.1.6: Recapitulation of Correlation test’s Results for ASEAN-10 from 1990-2014 ............................................................................................................
112 Table 5.2.1: Results of the correlation test between exchange rate and GDP in
116 ECOWAS-15 (1990-2014) .................................................................................. Table 5.2.2: Results of the correlation test between exchange rate and inflation
118 in ECOWAS-15 ................................................................................................... Table 5.2.3: Results of the correlation test between exchange rate and the FDI in ECOWAS-15 ...................................................................................................
121 Table 5.2.4: Results of the correlation test between exchange rate and
124 unemployment in ECOWAS-15 .......................................................................... Table 5.2.5: Results of the correlation test between exchange rate and trade balance in ECOWAS-15 ..................................................................................... 127 Table 5.2.6: Correlation test results for ECOWAS-15 ........................................ 131 Table 6.1.1: Inflation rates comparison before and after 1999 in ASEAN-6 ...... 168 Table 6.2.1: ECOWAS, 1990,1999 and 2014 Value Added (% of GDP) by Sector ...................................................................................................................
251
Table 6.2.2: Inflation in Guinea, the highest rate in ECOWAS 1999-2014 ........ 279 Table 6.2.3: Inflation in Nigeria and Ghana, Periods 1990-99 and 1999-2014 ... 281 Table 6.2.4: WAEMU’ Average Inflation rate, during period 1990-99 and 1999-2014 ............................................................................................................
282 Table 6.2.5: Average Exchange rate of 3 Post-conflicts Countries under various regimes ....................................................................................................
290 Table 6.2.6: Average FDI % in 3 Post-conflicts Countries under various regimes .................................................................................................................
290 Table 6.2.7: Average FDI (%) in ECOWAS, during period 1990-99 and 1999- 2014 .....................................................................................................................
296 Table 6.2.8: Comparison of Average Interest rates between fixed and floating regimes in ECOWAS ...........................................................................................
297 Table 6.2.9: Average Unemployment rates in ECOWAS, during period 1990- 99 and 99-2014 .....................................................................................................
305 Table 6.2.10: Growth of International Prices (%) of Major Commodities, 1990, 1999 and 2014 ......................................................................................................
316 Table 6.2.11: ECOWAS Countries’ Major exported Commodities 1999-2006 .. 318
Table 6.3.1 Estimation of the Inclusive Nominal Exchange rate (INEX) in Indonesia 1990-2014 ............................................................................................330
Table 6.3.2 Estimation of the Commodity Nominal Exchange rate (CNEX) in Nigeria 1990-2014 ...............................................................................................333
List of Figures Figure 1.2a: GDP growth Performance in ASEAN-10 from 1990-99 & 99-2014..
7 Figure 1.2b: GDP growth Performance in ECOWAS from 1990-99 & 99- 2014...........................................................................................................................
8 Figure 1.2c: Structural breaks and Exchange Rate Regimes Evolution in ASEAN-10 and ECOWAS-15 (1990-2014) …………………..........…………...
9 Figure 1.2d: Exchange Rate Performance against the USD in ASEAN-10 from 1990-99 & 99-2014 ………..............................................………………………...
14 Figure 1.2e: Exchange rate Performance in ECOWAS-15 from 90-99 & 99-
15 2014.……………………….................................…....................………………... Figure 1.2f: Overview of the Macroeconomic performance under Various Exchange rate regimes in ASEAN-10 …………………………………………...