Fundamentals of the Real Exchange Rate of the CFA Franc in WAEMU : An Application of Non-Stationary Panel Data Econometrics

Identifying the fundamentals of the real exchange rate of the CFA franc in WAEMU is the main objective of this paper. To achieve this, we used panel data over a period from 1984 to 2014. The results obtained using the Pooled Mean Group (PMG) method show that investment, government spending, trade openness and balance significantly influence the real exchange rate of the long-term CFA franc in WAEMU. With regard to the short-term relationship, the results show that only productivity and the trade balance are the fundamentals that significantly influence the real exchange rate of the CFA franc