September 10, 2025

Modeling the Relationship Between Exchange Rate Instability and Economic Performance in African Countries

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Empirical analysis reveals that exchange rate volatility negatively affects economic performance, suggesting inflation targeting is necessary.

Exchange rate volatility negatively influences long-run economic performance in African countries, while a stable exchange rate positively impacts it.
The analysis showed that inflation has a significant negative effect on economic performance, with a coefficient of -0.3647, underscoring its importance.
Utilizing econometric techniques like GARCH and Panel ARDL, the research assessed both short-run and long-run implications of exchange rate movements.
Key recommendations include stringent measures for inflation targeting to improve economic performance and stabilize interest rates across affected countries.

Simji et al. (2025) studied this question.

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Empirical analysis reveals that exchange rate volatility negatively affects economic performance, suggesting inflation targeting is necessary.