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Madagascar; A Competitiveness and Exchange Rate Assessment

  • Luc Eyraud
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    The purpose of this paper is to assess Madagascar's competitiveness in recent years, using both price and nonprice indicators and an exchange rate assessment of the currency. We estimate the distance between the equilibrium and the actual real exchange rates using three methods: the macroeconomic balance approach, the external sustainability approach, and the reduced-form equilibrium real exchange rate approach. These methods suggest that in the medium term the real exchange rate is only slightly overvalued. We also carry out a comparative analysis of nonprice indicators and find that Madagascar performs less favorably than its competitors on structural competitiveness.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/107.

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    Length: 30
    Date of creation: 01 May 2009
    Date of revision:
    Handle: RePEc:imf:imfwpa:09/107
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    1. Luca Antonio Ricci & Jaewoo Lee & Gian-Maria Milesi-Ferretti, 2008. "Real Exchange Rates and Fundamentals; A Cross-Country Perspective," IMF Working Papers 08/13, International Monetary Fund.
    2. Tamim Bayoumi & Jaewoo Lee & Sarma Jayanthi, 2006. "New Rates from New Weights," IMF Staff Papers, Palgrave Macmillan, vol. 53(2), pages 4.
    3. Camelia Minoiu & Patrick A. Imam, 2008. "Mauritius; A Competitiveness Assessment," IMF Working Papers 08/212, International Monetary Fund.
    4. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2006. "The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970-2004," CEPR Discussion Papers 5644, C.E.P.R. Discussion Papers.
    5. G. Russell Kincaid & Martin Fetherston & Peter Isard & Hamid Faruqee, 2001. "Methodology for Current Account and Exchange Rate Assessments," IMF Occasional Papers 209, International Monetary Fund.
    6. John Cady, 2003. "The Equilibrium Real Exchange Rate of the Malagasy Franc; Estimation and Assessment," IMF Working Papers 03/28, International Monetary Fund.
    7. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
    8. Ronald MacDonald, 1997. "What Determines Real Exchange Rates? The Long and Short of it," IMF Working Papers 97/21, International Monetary Fund.
    9. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Department of Economics Working Papers 2000-02, Department of Economics, Williams College.
    10. Jaewoo Lee & Jonathan David Ostry & Alessandro Prati & Luca Antonio Ricci & Gian-Maria Milesi-Ferretti, 2008. "Exchange Rate Assessments; CGER Methodologies," IMF Occasional Papers 261, International Monetary Fund.
    11. Martine Guerguil & Martin David Kaufman, 1998. "Competitiveness and the Evolution of the Real Exchange Rate in Chile," IMF Working Papers 98/58, International Monetary Fund.
    12. Ian W. Marsh & Stephen Tokarick, 1994. "Competitiveness Indicators; A Theoretical and Empirical Assessment," IMF Working Papers 94/29, International Monetary Fund.
    13. Peter Isard & Hamid Faruqee, 1998. "Exchange Rate Assessment; Extension of the Macroeconomic Balance Approach," IMF Occasional Papers 167, International Monetary Fund.
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