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The Equilibrium Real Exchange Rate of the Malagasy Franc: Estimation and Assessment
Author:
Mr. John Cady
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Series:
IMF Working Papers
Volume/Issue:
Volume 2003: Issue 028
Language:
English
Publication Date:
01 Feb 2003
DOI:
https://doi.org/10.5089/9781451844689.001
ISBN:
9781451844689
ISSN:
1018-5941
Pages:
19
Keywords:
WP; estimation; coefficient; Madagascar; vector; real exchange rate; cointegration; exchange rate misalignment; coefficient estimate; Engle-granger estimation technique; Johansen estimation technique; integration vector; cointigration estimation technique; Johansen method estimate; estimation period; test statistics; Real exchange rates; Real effective exchange rates; Terms of trade; Estimation techniques; Foreign assets
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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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Employing cointegration techniques, the long-run determinants of Madagascar's real exchange rate are examined from a stock-flow perspective. The long-run behavior of the real effective exchange rate is explained by the net foreign asset position and factors affecting trade flows. An index of the long-run equilibrium real exchange rate is developed to assess the degree of misalignment. The general conclusions are that the Malagasy franc has experienced significant misalignment in the past, but that the recent appreciation of the real effective exchange rate is consistent with changes in the fundamentals, particularly anticipated improvements in the net foreign assets position stemming from Madagascar's eligibility for assistance under the enhanced HIPC Initiative.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund