The Equilibrium Real Exchange Rate of the Malagasy Franc: Estimation and Assessment

 
Author/Editor: Cady, John
 
Publication Date: February 01, 2003
 
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Summary: Employing cointegration techniques, the long-run determinants of Madagascar's real exchange rate are examined from a stock-flow perspective. The long-run behavior of the real effective exchange rate is explained by the net foreign asset position and factors affecting trade flows. An index of the long-run equilibrium real exchange rate is developed to assess the degree of misalignment. The general conclusions are that the Malagasy franc has experienced significant misalignment in the past, but that the recent appreciation of the real effective exchange rate is consistent with changes in the fundamentals, particularly anticipated improvements in the net foreign assets position stemming from Madagascar's eligibility for assistance under the enhanced HIPC Initiative.
 
Series: Working Paper No. 03/28
Subject(s): Real effective exchange rates | Madagascar | Malagasy franc

Author's Keyword(s): Madagascar | real exchange rate | cointegration | exchange rate misalignment
 
English
Publication Date: February 01, 2003
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA0282003 Pages: 18
Price:
US$15.00 (Academic Rate:
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