Exchange Rate Assessment in a Resource-Dependent Economy: The Case of Botswana

Author/Editor:

Corinne C Delechat ; Matthew Gaertner

Publication Date:

March 1, 2008

Electronic Access:

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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:

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.

Series:

Working Paper No. 2008/083

Subject:

Current account Exchange rates Exports Real effective exchange rates Real exchange rates

English

Publication Date:

March 1, 2008

ISBN/ISSN:

9781451869446/1018-5941

Stock No:

WPIEA2008083

Pages:

29

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