Tanzania’s Equilibrium Real Exchange Rate

Author/Editor:

Niko A Hobdari

Publication Date:

May 1, 2008

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Tanzania's real effective exchange rate (REER) has depreciated sharply since end-2000, reversing the appreciation that took place in the second half of the 1990s. Single-country and panel data estimates, and the external sustainability approach, suggest that Tanzania's REER is currently modestly undervalued relative to its estimated equilibrium level. Looking forward, a modest trend appreciation of the equilibrium REER is expected, consistent with continued high GDP growth and an expected recovery in terms of trade. In addition, capital inflows to Tanzania could be significantly higher than currently expected, to take advantage of Tanzania's natural resources and strong policy framework. If so, these inflows would contribute to an additional appreciation by as much as 20 percent of the equilibrium REER.

Series:

Working Paper No. 08/138

Subject:

English

Publication Date:

May 1, 2008

ISBN/ISSN:

9781451869972/1018-5941

Stock No:

WPIEA2008138

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

23

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