A Roadmap to a Successful Exchange Rate Regime Transition: Takeaways from 6 African Transitions
A Roadmap to a Successful Exchange Rate Regime Transition: Takeaways from 6 African Transitions

Summary/Abstract: This article investigates the role of monetary policies in the success of exchange rate regime transition and the mitigation of related risks. We adopted a comparative methodology for three types of regime switches using 3 GARCH family models and data from 6 African countries over two decades. Our main findings are that a gradual and well-prepared transition improves its outcome and allows the market more flexibility in absorbing domestic and external volatilities, even during a crisis. The results of this study will provide policymakers with a road map to succeed in the exchange rate regime transition and mitigate the inherent risks.

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