Many have now moved away from that approach, opening up a channel that might help to address external shocks. With commodity prices falling, sub-Saharan African economies face a potential worsening of their internal relative price balance between tradables and nontradables.2 Assuming that inflation falls with declining export prices, moderate currency depreciation will help economies to rebalance and resume growth.
Where inflation is persistent and economic growth weak, however, currency depreciation can exacerbate the stagflation and has less clear policy implications. It seems sensible to allow floating currencies to absorb external shocks, to maintain policy stances that do not worsen imbalances, and to move towards the microeconomic reforms and network infrastructures needed to help export diversification and sustain investment by the private sector generally.