IMF Working Papers Volume 1998 Issue 148: Purchasing Power Parities in Five East African Countries: Burundi, Kenya, Rwanda, Tanzania, and Uganda (1998)

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Purchasing Power Parities in Five East African Countries: Burundi, Kenya, Rwanda, Tanzania, and Uganda

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Mr. Noureddine Krichene

Mr. Noureddine Krichene
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Series:: IMF Working Papers

Volume/Issue:: Volume 1998: Issue 148

Publication Date:: 01 Oct 1998

DOI:: https://doi.org/10.5089/9781451856798.001

ISBN:: 9781451856798

ISSN:: 1018-5941

Pages:: 37

Keywords:: WP; nominal exchange rate; U.S. dollar; inflation rate; PPP theory; Purchasing power parity; competitiveness; cointegration analysis; vis-à-vis Tanzania; equilibrium path; currency depreciation; adjustment coefficient; Uganda shilling; nominal exchange rate determination; Exchange rates; Real exchange rates; Public investment and public-private partnerships (PPP); Currencies; Africa

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Series:: IMF Working Papers

Volume/Issue:: Volume 1998: Issue 148

Language:: English

Publication Date:: 01 Oct 1998

DOI:: https://doi.org/10.5089/9781451856798.001

ISBN:: 9781451856798

ISSN:: 1018-5941

Pages:: 37

Keywords:: WP; nominal exchange rate; U.S. dollar; inflation rate; PPP theory; Purchasing power parity; competitiveness; cointegration analysis; vis-à-vis Tanzania; equilibrium path; currency depreciation; adjustment coefficient; Uganda shilling; nominal exchange rate determination; Exchange rates; Real exchange rates; Public investment and public-private partnerships (PPP); Currencies; Africa

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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In a case study of Burundi, Kenya, Rwanda, Tanzania, and Uganda, this paper finds that bilateral real exchange rates revert to a long-term equilibrium in line with purchasing power parities, implying that these countries constitute an integrated trading zone, their markets are interdependent and arbitrage works efficiently, and intraregional competitiveness is preserved. These findings are partly explained by the flexibility of nominal exchange rates and prices and the absence of long-term productivity differences among these countries. To strengthen market integration, foster private sector development, and enhance growth prospects, the paper emphasizes the importance of increased trade, competitive labor markets, flexible exchange rates, and convergence of macroeconomic and structural policies.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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