Intra-African migration and the real exchange rate

Abstract

Africa’s openness to migration is strongly continental (about 80% of African migrants are settled in Africa). This paper explores how intra-continental migration impacts the real exchange rates of African economies. International migration may impact the real exchange rate through many pathways (demand-side and supply-side effects on prices, indirect effects through demography structure and remittances), thus leading to contradictory effects. Using a sample of 51 African countries over the period 1990–2019, econometric estimations show evidence that an increase in net intra-African migration exerts an appreciating effect on the real exchange rate of host countries. This finding holds when controlling for potential endogeneity using gravity-based instruments for migration.