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

Author/Editor:

Noureddine Krichene

Publication Date:

October 1, 1998

Electronic Access:

Free Full text (PDF file size is 2120 KB).Use the free Adobe Acrobat Reader to view this PDF file

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.

Series:

Working Paper No. 98/148

Subject:

English

Publication Date:

October 1, 1998

ISBN/ISSN:

9781451856798/1018-5941

Stock No:

WPIEA1481998

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

37

Please address any questions about this title to publications@imf.org