Study of the determinants of the competitiveness of the Beninese economy compared to the Nigerian economy: an analysis by the real exchange rate according to the purchasing power parity

Abstract

The issue of competitiveness as an important factor in the growth and development of an economy is amply attested to by relevant facts in the economic literature. For the Beninese economy, whose trade balance remains in deficit and yet has the largest market in Africa as its neighbour, this analysis deserves attention in view of the existing situation and the opportunities offered by this market. For this purpose, the analysis was based on the real exchange rate according to the purchasing power parity approach Thus, using a co-integration model based on the ARDL (autoregressive staggered delay) approach, the study explains a long-term relationship between the real exchange rate (RER) and the exogenous variables that are:. capital inflows, re-exports and public consumption. In the short term, it is the nominal exchange rate of the parallel market that negatively influences the RER. In addition, the COVID 19 pandemic, while slightly and positively influencing the RER, in the short term, affects it negatively in the long term. As an economic policy implication, Benin needs to avoid excessive expansive fiscal policies, discourage re-export trade, and control or regulate informal foreign exchange markets.

Keywords: trade, competitiveness, exchange rate

JEL Classification: C51, F14, O19

Type of paper: empirical research