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Estimating the Equilibrium Real Exchange Rate for Namibia

Joel Eita () and Moses Sichei
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Moses Sichei: Department of Economics, University of Pretoria

No 200608, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper estimates the equilibrium real exchange rate and the resulting real exchange rate misalignment in Namibia during the period 1970 to 2004. The equilibrium real exchange rate is determined by trade and exchange restrictions (openness), terms of trade and ratio of investment to GDP. An increase in openness and ratio of investment to GDP cause the real exchange rate to appreciate. The real exchange rate was overvalued for almost the entire estimation period. It reached its equilibrium value in 1998. It is important to monitor the real exchange rate, and ensure that the divergence from the equilibrium value is minimised.

Keywords: equilibrium real exchange rate; misalignment; cointegrating vector (search for similar items in EconPapers)
JEL-codes: F31 F41 C22 C32 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2006-02
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