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Exchange Rate Assessment in a Resource-Dependent Economy

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  • Corinne Deléchat
  • Matthew Gaertner
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    Abstract

    The paper combines various methodologies to assessing the level of the exchange rate in Botswana, explicitly taking into account the implications of its dependency on diamond exports. Real exchange rate estimation indicates that, after a period of overvaluation, Botswana''s real effective exchange rate is now broadly in line with economic fundamentals. The projected current account path is also consistent with external sustainability, defined to ensure sufficient savings of diamond wealth in order to maintain a stable import and consumption path through 2050. Sustaining consumption over the longer term will however require to address obstacles to non-diamond exports'' competitiveness.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/83.

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    Length: 29
    Date of creation: 01 Mar 2008
    Date of revision:
    Handle: RePEc:imf:imfwpa:08/83

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    Related research

    Keywords: Exchange rate assessments; Diamonds; Real effective exchange rates; Current account balances; exchange rate; real exchange rate; terms of trade; trading partners; effective exchange rate; equilibrium exchange rate; real effective exchange rate; tradable goods; balance of payments; export performance; exchange rates; current account surplus; exchange rate regime; global competitiveness; partner countries; trade openness; nominal exchange rate; real exchange rates; trading partner; exchange rate indices; skilled workers; exchange rate appreciation; skilled labor; nominal effective exchange rate; export diversification; oil-producing countries; exchange rate valuation; foreign exchange; current account balance; nontradable goods; exchange controls; domestic demand; price fluctuations; measure of trade; exchange rate misalignments; trade data; world trade; domestic market; real exchange rate overvaluation; exchange rate misalignment; effective exchange rates; external shocks; neighboring countries; open trade regime; real exchange rate misalignments; competition policy; foreign investment; export prices; exchange rate overvaluation; open trade; trade regime; exchange rate developments; domestic capital markets; external funding; overvalued exchange rate; net inflows;

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    References

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    1. Jan-Peter Olters, 2007. "Old Curses, New Approaches? Fiscal Benchmarks for Oil-Producing Countries in Sub-Saharan Africa," IMF Working Papers, International Monetary Fund 07/107, International Monetary Fund.
    2. Joannes Mongardini & Alexander Chudik, 2007. "In Search of Equilibrium," IMF Working Papers, International Monetary Fund 07/90, International Monetary Fund.
    3. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198774501, October.
    4. Charalambos G. Tsangarides & Gustavo Ramirez, 2007. "Competitiveness in the CFA Franc Zone," IMF Working Papers, International Monetary Fund 07/212, International Monetary Fund.
    5. Magnus Saxegaard & Stéphane Roudet & Charalambos G. Tsangarides, 2007. "Estimation of Equilibrium Exchange Rates in the Waemu," IMF Working Papers, International Monetary Fund 07/194, International Monetary Fund.
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    Cited by:
    1. Hasanov, Fakhri, 2010. "The impact of real oil price on real effective exchange rate: The case of Azerbaijan," MPRA Paper 33493, University Library of Munich, Germany.
    2. Jens R. Clausen, 2008. "Calculating Sustainable Non-Mineral Balances As Benchmarks for Fiscal Policy," IMF Working Papers, International Monetary Fund 08/117, International Monetary Fund.

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