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

31 Pages Posted: 21 Sep 2009

See all articles by Corinne Deléchat

Corinne Deléchat

International Monetary Fund (IMF)

Matthew Gaertner

Center for College and Career Success

Date Written: April 2008

Abstract

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.

Keywords: Exchange rate assessments, Botswana, Diamonds, Exports, Competition, Real effective exchange rates, Current account balances

Suggested Citation

Deléchat, Corinne and Gaertner, Matthew, Exchange Rate Assessment in a Resource - Dependent Economy: The Case of Botswana (April 2008). IMF Working Paper No. 08/83, Available at SSRN: https://ssrn.com/abstract=1475515

Corinne Deléchat (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Matthew Gaertner

Center for College and Career Success

United States

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