Causality between economic growth and changes of the real exchange rate in Cte dIvoire

This study aims to analyze the relationship between changes in the real effective exchange rate and economic growth in Cote d'Ivoire. The autoregressive distributed lag (ARDL) approach and the Toda-Yamamoto causality test were used. The data cover the period 1980 to 2012. The results conclude the existence of a long-term relationship between economic growth and variation in the real effective exchange rate and the gross fixed capital formation. Furthermore, the results of causality test confirm the existence of bidirectional causality between the long-term misalignment and economic growth in Cote d'Ivoire. Thus, the Ivorian authorities have to observe and follow the evolution of real effective exchange rate by controlling the level and the evolution of the macroeconomic fundamentals of the economy (real GDP, productivity, terms of trade, net external position, etc...) simultaneously and this within a global framework of West Africa of Economic and Monetary Union (WAEMU). Key words: ARDL, causality, growth, real exchange rate