INTERNATIONAL PRICES, MONETARY AND INCOME SHOCKS: A SVAR MODEL OF THE EXTERNAL TRADE CHANNEL IN AFRICAN ECONOMIES

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By: Giscard ASSOUMOU ELLA, C├ęcile BASTIDON, Philippe GILLES
JEL: F14, C22, F43, O11
Keywords: African economies, international prices shocks, international income shocks, FED monetary policy international transmission, external trade channel, SVAR model

We study the effects of international monetary, income and prices shocks on domestic income through the external trade channel in 16 African countries between 1970 and 2012, using a SVAR Model. The results emphasize that domestic income is exposed to international shocks through the impacts of these shocks on export and import flows of goods and services. The intensity of this exposure depends on the transmission channel, type of external shock, specialization of each country and domestic public policies. All the countries of the sample are at least exposed to one international shock. 13 countries are exposed to real GDP OECD per capita shock, 10 countries to harmonized inflation in OECD countries. Of 7 countries that export oil products, 3 are exposed to world prices of oil through the exports channel. 5 countries are exposed to this variable through the imports channel. Only 4 countries of the sample are exposed to the FED monetary policy. Moreover, the results for domestic variables in the income equations suggest that countries impacted by an external shock could use these variables to sustain economic growth (i. e. increase public expenditure in general and investment in human and physical capital in particular).