An Empirical Test of Real Exchange Rate Overshooting in Selected African Countries

Exchange rate overshooting explains the daily behaviour of exchange rates. Irrespective of the importance of this prodigy, not enough studies specifically in the African context have been conducted. Hence, the study aims to investigate the validity of the overshooting hypothesis in a panel of African countries. It is informed by the Dornbusch model of exchange rate overshooting. The random effects technique is employed to test for this relationship during the sample period of 1985 to 2016, with the findings of the study revealing evidence of exchange rate overshooting.