Cote d’Ivoire : Competitiveness, Cocoa, and the Real Exchange Rate
This paper explores competitiveness of Cote d'Ivoire's economy over a long period of 1960-2003 and its link with cocoa prices. The main conclusions are as follows. First, using four measures of real effective exchange rate (REER) for the...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2007/11/8789763/cote-divoire-competitiveness-cocoa-real-exchange-rate-cote-divoire-competitiveness-cocoa-real-exchange-rate http://hdl.handle.net/10986/7629 |
| Summary: | This paper explores competitiveness of
Cote d'Ivoire's economy over a long period of
1960-2003 and its link with cocoa prices. The main
conclusions are as follows. First, using four measures of
real effective exchange rate (REER) for the 1960-2002
period, we track the evolution of REER and conclude, inter
alia, that until 2003, REER remained well below its 1994
level. Second, we find that based on our measure of the
multilateral REER with dynamic weights, which covers most
recorded trade, France no longer dominates Cote
d'Ivoire's trade. Instead, Cote d'Ivoire has
diversified its set of trading partners. Unfortunately, it
has also specialized in one export product, raw cocoa. This
paper aims to contribute to the question to what extent do
cocoa prices affect Cote d'Ivoire's
competitiveness in world trade? Third, the answer to this
question is that cocoa prices are an important determinant
of Cote d'Ivoire's competitiveness. Similar to the
case of a classic "Dutch Disease," increases in
the real world price of a "natural resource"
(i.e., cocoa) tend to result in the appreciation of the CFA
franc and a loss in competitiveness. Econometric tests
further confirm that 1994 was a "break-point" not
only for growth and productivity (as documented in the two
related papers) but also for trade competitiveness. Recent
productivity per worker trends versus wages also seem to
indicate slow growth in 1996-2000, without major improvement
in competitiveness. |
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