Cote d’Ivoire : Competitiveness, Cocoa, and
the Real Exchange Rate

Bogetic, Zeljko; Espina, Carlos; Noer, John

Cote d’Ivoire : Competitiveness, Cocoa, and the Real Exchange Rate

Autores

Bogetic, Zeljko

Espina, Carlos

Noer, John

Editor

World Bank, Washington, DC

Descripción

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.

Palabras clave

AGRICULTURE, ANNUAL GROWTH, BALANCE OF PAYMENT, BASE YEAR, BILL, BUSINESS CYCLES, CAPITAL MOBILITY, COCOA PRICE, COCOA PRICES, COMMODITIES, COMMODITY, COMMODITY EXPORTS, COMMODITY PRICE, COMMODITY PRICES, COMPETITIVE EQUILIBRIUM, COMPETITIVENESS, CONSUMER GOODS, CONSUMER PRICE, CONSUMER PRICE INDEX, CONSUMER PRICE INDICES, CURRENCY, CUSTOMER BASE, DEFLATORS, DEPENDENT VARIABLE, DESCRIPTIVE STATISTICS, DEVALUATION, DEVELOPING COUNTRIES, DIRECTION OF TRADE, DISTRIBUTION OF TRADE, DOMESTIC PRICES, DUMMY VARIABLE, DUTCH DISEASE, ECONOMETRICS, ECONOMIC ACTIVITY, ECONOMIC GROWTH, ECONOMIC STATISTICS, EMERGING ECONOMIES, ERROR TERM, EXCESS DEMAND, EXPORT GOOD, EXPORTER, EXPORTS, EXPOSURE, EXTERNAL SHOCK, EXTERNAL SHOCKS, FIXED EXCHANGE RATE, FIXED EXCHANGE RATE REGIME, FOREIGN CURRENCY, FOREIGN EXCHANGE, FOREIGN EXCHANGE EARNINGS, FUNDAMENTAL DETERMINANT, FUTURES, GDP, GDP DEFLATOR, GROSS DOMESTIC PRODUCT, GROWTH RATES, IMPORT, IMPORTS, INEFFICIENCY, INFLATION, INSTRUMENTAL VARIABLES, INTEREST RATE DIFFERENTIALS, INTERNATIONAL COMPETITIVENESS, INTERNATIONAL PRICE, INTERNATIONAL PRICES, INTERNATIONAL TRADE, LABOR FORCE, LABOR FORCE GROWTH, LOCAL CURRENCY, LONG-RUN EQUILIBRIUM, MACROECONOMIC VARIABLE, MARKET SHARE, NATURAL RESOURCE, NOMINAL WAGE, OPEN ECONOMIES, OUTPUT, PEG, POLICY RESEARCH, POVERTY REDUCTION, PRICE DECLINES, PRICE QUOTATIONS, PRICE RIGIDITIES, PURCHASING, PURCHASING POWER, PURCHASING POWER PARITY, REAL ADJUSTMENTS, REAL APPRECIATION, REAL DEPRECIATION, REAL DISTURBANCES, REAL EFFECTIVE EXCHANGE RATE, REAL EXCHANGE, REAL EXCHANGE RATE, REAL EXCHANGE RATES, REAL INTEREST, REAL INTEREST RATE, REAL OUTPUT, RELATIVE PRICE, SERIAL CORRELATION, SHARE OF WORLD OUTPUT, SLOW GROWTH, SPOT PRICE, STRUCTURAL CHANGE, STRUCTURAL REFORMS, SUPPLIERS, TOTAL EXPORTS, TOTAL IMPORTS, TRADABLE GOODS, TRADE COMPETITIVENESS, TRADE PATTERNS, TRADE RESTRICTIONS, TRADE STATISTICS, TRADES, TRADING PARTNER, TRADING PARTNERS, VALUE ADDED, VOLATILITY, WAGES, WEIGHTS, WHOLESALE PRICE, WHOLESALE PRICE INDICES, WORLD MARKET, WORLD MARKETS, WORLD PRICE, WORLD PRICES, WORLD TRADE