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Exchange Rate Assessment in a Resource-Dependent Economy: The Case of Botswana

  • Corinne Deléchat
  • Matthew Gaertner
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    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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    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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    1. Joannes Mongardini & Alexander Chudik, 2007. "In Search of Equilibrium: Estimating Equilibrium Real Exchange Rates in Sub-Saharan African Countries," IMF Working Papers 07/90, International Monetary Fund.
    2. Charalambos G. Tsangarides & Gustavo Ramirez, 2007. "Competitiveness in the CFA Franc Zone," IMF Working Papers 07/212, International Monetary Fund.
    3. Magnus Saxegaard & Stéphane Roudet & Charalambos G. Tsangarides, 2007. "Estimation of Equilibrium Exchange Rates in the WAEMU: A Robustness Analysis," IMF Working Papers 07/194, International Monetary Fund.
    4. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    5. Jan-Peter Olters, 2007. "Old Curses, New Approaches? Fiscal Benchmarks for Oil-Producing Countries in Sub-Saharan Africa," IMF Working Papers 07/107, International Monetary Fund.
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