Contagion Eﬀect, Exchange Rate, Overvaluation, Undervaluation, Speculative Attacks, Stochastic-Markov Process
The study employs the Markovian processs on annual nominal eﬀective exchange rate of CFA Franc spanning 1975 to 2017 to examine whether the CFA franc is prone to speculative attacks or a contagion eﬀect. The ﬁndings reveal that the expected duration for the CFA Franc to be undervalued is twice higher than for it to be overvalued. This validates the contagion eﬀect of a Euro crisis on the CFA Franc. Though the level of growth increased signiﬁcantly during the undervaluation era, the level of uncertainty remains equally high. The ﬁndings conﬁrm that exchange rate devaluation inﬂuences the expectations of private agents, which in turn triggers an attack on the domestic currency.
CBN Journal of Applied Statistics
Nkwatoh, Louis Sevitenyi Mr
"Is the CFA Franc Prone to Speculative Attacks or a Contagion Eﬀect: a Stochastic-Markov Transition Analysis for Cameroon,"
CBN Journal of Applied Statistics (JAS): Vol. 10
, Article 5.
Available at: https://dc.cbn.gov.ng/jas/vol10/iss1/5