Purchasing Power Parities in Five East African Countries: Burundi, Kenya, Rwanda, Tanzania, and Uganda

October 1, 1998

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Noureddine Krichene. Purchasing Power Parities in Five East African Countries: Burundi, Kenya, Rwanda, Tanzania, and Uganda, (USA: International Monetary Fund, 1998) accessed September 21, 2024

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

In a case study of Burundi, Kenya, Rwanda, Tanzania, and Uganda, this paper finds that bilateral real exchange rates revert to a long-term equilibrium in line with purchasing power parities, implying that these countries constitute an integrated trading zone, their markets are interdependent and arbitrage works efficiently, and intraregional competitiveness is preserved. These findings are partly explained by the flexibility of nominal exchange rates and prices and the absence of long-term productivity differences among these countries. To strengthen market integration, foster private sector development, and enhance growth prospects, the paper emphasizes the importance of increased trade, competitive labor markets, flexible exchange rates, and convergence of macroeconomic and structural policies.

Subject: Currencies, Exchange rates, Expenditure, Foreign exchange, Money, Public investment and public-private partnerships (PPP), Purchasing power parity, Real exchange rates

Keywords: Adjustment coefficient, Africa, Cointegration analysis, Competitiveness, Currencies, Currency depreciation, Equilibrium path, Exchange rates, Inflation rate, Nominal exchange rate, Nominal exchange rate determination, PPP theory, Public investment and public-private partnerships (PPP), Purchasing power parity, Real exchange rates, U.S. dollar, Uganda shilling, Vis-à-vis Tanzania, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1998/148
Stock No:

WPIEA1481998
ISBN:

9781451856798
ISSN:

1018-5941

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