Exchange Rate Assessment in a Resource-Dependent Economy: The Case of Botswana
March 1, 2008
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Summary
The paper combines various methodologies to assessing the level of the exchange rate in Botswana, explicitly taking into account the implications of its dependency on diamond exports. Real exchange rate estimation indicates that, after a period of overvaluation, Botswana's real effective exchange rate is now broadly in line with economic fundamentals. The projected current account path is also consistent with external sustainability, defined to ensure sufficient savings of diamond wealth in order to maintain a stable import and consumption path through 2050. Sustaining consumption over the longer term will however require to address obstacles to non-diamond exports' competitiveness.
Subject: Current account, Exchange rates, Exports, Real effective exchange rates, Real exchange rates
Keywords: exchange rate, GDP, REER, WP
Pages:
29
Volume:
2008
DOI:
Issue:
083
Series:
Working Paper No. 2008/083
Stock No:
WPIEA2008083
ISBN:
9781451869446
ISSN:
1018-5941
