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Foreign Exchange Market Efficiency In Botswana



    () (Department of Economics, University of Botswana, P/Bag UB 705, Gaborone Botswana)



The random walk behaviour of exchange rates in Botswana’s foreign exchange market is explored by employing unit root tests. The unit root tests employed include the ADF, PP and the KPSS. This paper uses monthly data for the period 2000:01 to 2015:12. The conclusive evidence based on the unit roots tests indicates that the behaviour of the Pula against the South African Rand, Japanese Yen and the American Dollar exchange rates is consistent with the random walk process and the weak form efficiency market hypothesis. However, the Pula against the British Pound is inconsistent with the weak form efficiency market hypothesis. These results compliment those from Namibia (Mabakeng and Sheefeni, 2014). Furthermore, there is no evidence of the semi-strong form level of efficiency as revealed by the cointegration results obtained. These results corroborates with those found by Wickremasinghe (2008) and Çiçek (2014) in which weak form was found to exist whilst the semi-strong form was found not to exist. This paper has filled an important gap as it is the first study to investigate the efficiency of the foreign exchange market in Botswana.

Suggested Citation

  • Gofaone Matebejana & Gaotlhobogwe Motlaleng & James Juana, 2017. "Foreign Exchange Market Efficiency In Botswana," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 19, pages 55-74, June.
  • Handle: RePEc:aic:revebs:y:2017:j:19:motlalengg

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    References listed on IDEAS

    1. Rizwana Bashir & Rabia Shakir & Badar Ashfaq & Atif Hassan, 2014. "The Efficiency of Foreign Exchange Markets in Pakistan: An Empirical Analysis," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 19(1), pages 133-149, Jan-June.
    2. Mark P. Taylor & Lucio Sarno, 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective and, If So, How Does It Work?," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 839-868, September.
    3. Swarna Dutt & Dipak Ghosh, 1999. "A note on the foreign exchange market efficiency hypothesis," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 23(2), pages 157-161, June.
    4. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    5. Abullah M. Noman & Minhaz U. Ahmed, 2008. "Efficiency of the foreign exchange markets in South Asian Countries," AIUB Bus Econ Working Paper Series AIUB-BUS-ECON-2008-18, American International University-Bangladesh (AIUB), Office of Research and Publications (ORP), revised Jun 2008.
    6. Kealeboga Masalila & Oduetse Motshidisi, 2003. "Botswana's exchange rate policy," BIS Papers chapters,in: Bank for International Settlements (ed.), Regional currency areas and the use of foreign currencies, volume 17, pages 122-127 Bank for International Settlements.
    7. Guneratne Banda Wickremasinghe, 2004. "Efficiency Of Foreign Exchange Markets: A Developing Country Perspective," International Finance 0406004, University Library of Munich, Germany.
    8. Abdullah M. Noman & Minhaz U. Ahmed, 2009. "Efficiency of the foreign exchange markets in South Asia," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 1(4), pages 295-305.
    9. Hsien-Yi Lee & Khatanbaatar Sodoikhuu, 2012. "Efficiency Tests in Foreign Exchange Market," International Journal of Economics and Financial Issues, Econjournals, vol. 2(2), pages 216-224.
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    More about this item


    Botswana; Foreign exchange market; Efficiency market hypothesis; Weak form efficiency;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange


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