Empirical Studies on Exchange Rate Volatility in Africa in the 2000s: General Trends and Future Perspectives

This study aims to provide a comprehensive review of the empirical literature on exchange rate volatility in African countries. In particular, the methodological approaches, data sets used, variables analyzed and findings of 50 empirical studies conducted in the 2000s are systematically reviewed. It is observed that GARCH models, which are widely used in the literature, provide a basic methodological framework for analyzing exchange rate volatility. Most of the studies have investigated the effects of macroeconomic variables such as economic growth, international trade volume, oil prices and inflation on exchange rate volatility. The analyzed literature shows that exchange rate volatility increases economic uncertainty and has negative effects on investment and trade. However, the methodological approaches used and the variables analyzed are largely similar across different countries and periods, which points to an important gap in this field. The fact that studies are limited within a certain framework suggests that more innovative and inclusive approaches should be developed. In this context, this study draws attention to these gaps in the literature and offers suggestions for future research. In particular, it is emphasized that more recent data should be used, regional and cross-country comparisons should be increased and innovative econometric methods should be applied. This literature review aims to contribute to the existing body of knowledge on understanding exchange rate volatility in African countries and to serve as an important reference source for policy makers.