Tanzania’s Equilibrium Real Exchange Rate

May 1, 2008

Preview Citation

Format: Chicago

Niko A Hobdari. Tanzania’s Equilibrium Real Exchange Rate, (USA: International Monetary Fund, 2008) accessed November 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

Tanzania's real effective exchange rate (REER) has depreciated sharply since end-2000, reversing the appreciation that took place in the second half of the 1990s. Single-country and panel data estimates, and the external sustainability approach, suggest that Tanzania's REER is currently modestly undervalued relative to its estimated equilibrium level. Looking forward, a modest trend appreciation of the equilibrium REER is expected, consistent with continued high GDP growth and an expected recovery in terms of trade. In addition, capital inflows to Tanzania could be significantly higher than currently expected, to take advantage of Tanzania's natural resources and strong policy framework. If so, these inflows would contribute to an additional appreciation by as much as 20 percent of the equilibrium REER.

Subject: Current account deficits, Exchange rates, Exports, Foreign direct investment, Real effective exchange rates

Keywords: Current account, Deficit, GDP, Real effective exchange rate, Terms of trade, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/138
Stock No:

WPIEA2008138
ISBN:

9781451869972
ISSN:

1018-5941

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