Estimation of the Equilibrium Real Exchange Rate for Malawi

IMF Working Papers, May 1, 2003

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Estimation of the Equilibrium Real Exchange Rate for Malawi

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Bibliographic details

• Authors: Johan Mathisen
• Published: May 1, 2003
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451852783.001

Summary and Core Findings

• The paper computes Malawi's equilibrium real exchange rate as a function of its fundamentals derived from economic theory.
• Evidence supports the equilibrium approach to exchange rate determination.
• Several variables, particularly government consumption and real per capita growth, are found to drive movements in the time-varying equilibrium real exchange rate.
• Following a shock there is a rapid reversion of the real exchange rate to its time-varying equilibrium, with a half-life of reversion of about 11 months.

Methodology and Analytical Focus

• Equilibrium real exchange rate is modeled as a function of fundamentals as derived from economic theory.
• Time-varying equilibrium concept is emphasized, with analysis of drivers and dynamic reversion following shocks.

Key Statistics and Publication Metadata

• Author: Johan Mathisen
• Publication date: May 1, 2003
• Series: Working Paper No. 2003/104
• Issue: 104
• Volume: 2003
• Pages: 25
• DOI: https://doi.org/10.5089/9781451852783.001
• Stock No: WPIEA1042003
• ISBN: 9781451852783
• ISSN: 1018-5941
• Exact quantified result: half-life of reversion of about 11 months

Subjects and Keywords

• Subjects: Exchange rates; Foreign exchange; Government consumption; International trade; National accounts; Real effective exchange rates; Real exchange rates; Terms of trade
• Keywords: Africa; Equilibrium Real Exchange Rate; Exchange rates; expansionary fiscal policy; fiscal policy variable; Government consumption; Malawi; Malawi equilibrium exchange rate; nominal exchange rate depreciation; Real effective exchange rates; Real exchange rates; Terms of trade; utility function; WP

Source: IMF Working Papers — "Estimation of the Equilibrium Real Exchange Rate for Malawi" by Johan Mathisen, May 1, 2003.

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• Estimation of the Equilibrium Real Exchange Rate for Malawi - WP/03/104
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