Sub-Saharan African Countries' Exchange Rate Determinants 1988–2024

Abstract

With an emphasis on the Anglophone ECOWAS member states of Ghana, Liberia, Nigeria, Sierra Leone, and the Gambia, this paper examines the macroeconomic factors that influence exchange rate changes in Sub-Saharan African nations between 1988 and 2024. The study examines how the GDP, interest rates, inflation rate, and trade openness affect the real exchange rate using panel Ordinary Least Squares (OLS) regression and descriptive statistics.  The low of one price (LOP) and purchasing power parity (PPP) theories served as the study's compass.  The results indicate that while trade openness significantly boosts the exchange rate, inflation and interest rates significantly hurt it. GDP exhibits an insignificant negative correlation. These findings are partially consistent with previous empirical studies, most notably Dung and Jude (2022) and Moses (2021). The findings imply that macroeconomic stability, particularly inflation and interest rate management, is critical for exchange rate stabilisation. To promote long-term exchange rate regimes in the region, the study suggests increased monetary coordination, inflation control, and economic structural reforms