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Author: Kisu Simwaka Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
The paper assesses whether the exchange rate is affected by monetary policy and whether these effects are permanent or transitory. The paper takes the position that monetary policy is very crucial to exchange rate management. A real effective exchange rate model is estimated to generate real effective exchange rate misalignment. Causality tests are performed between several measures of monetary shocks (consistent with other empirical works) and the real effective exchange rate misalignment. The results show that excess money supply predicts real effective exchange rate misalignment with no feedback effects. In the second stage, a model of nominal exchange rate is estimated. Since we find co-integration, the model is estimated with first difference of the non-stationary variables, level variables and the co-integrating vector. Results indicate that a nominal exchange rate over the period is determined by real income growth, rate of inflation, money supply growth and real effective exchange rate misalignment. The adjustment speed from the error correction term is consistent with a market-determined exchange rate responding to excess money supply.
Author: Kisu Simwaka Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
The paper assesses whether the exchange rate is affected by monetary policy and whether these effects are permanent or transitory. The paper takes the position that monetary policy is very crucial to exchange rate management. A real effective exchange rate model is estimated to generate real effective exchange rate misalignment. Causality tests are performed between several measures of monetary shocks (consistent with other empirical works) and the real effective exchange rate misalignment. The results show that excess money supply predicts real effective exchange rate misalignment with no feedback effects. In the second stage, a model of nominal exchange rate is estimated. Since we find co-integration, the model is estimated with first difference of the non-stationary variables, level variables and the co-integrating vector. Results indicate that a nominal exchange rate over the period is determined by real income growth, rate of inflation, money supply growth and real effective exchange rate misalignment. The adjustment speed from the error correction term is consistent with a market-determined exchange rate responding to excess money supply.
Author: Karl Pauw Publisher: Intl Food Policy Res Inst ISBN: Category : Social Science Languages : en Pages : 36
Book Description
The Malawian economy has in recent months been plagued by a severe foreign exchange crisis, fueled in part by a steadily rising import bill, sharp successive declines in tobacco export prices, the suspension of direct government budget support from several development partners in 2011, and an all-time low in international investor confidence. Up until the regime change in April 2012, the government resisted calls for a devaluation, which at the time resulted in a thriving parallel foreign exchange market. At its peak, the Malawi kwacha was trading at a premium of up to 100 percent in this secondary market. Economic theory shows that such a situation has adverse implications for an economy in terms of the balance-of-payments adjustment process and income distribution in the economy. Those with access to foreign exchange at the official rate are able to extract rents by selling foreign currency or imported goods at inflated prices. Imports sold domestically are then often valued at the parallel exchange rate rather than the official rate, with the parallel market rate serving as the only adjustment mechanism through which equilibrium can be restored in the balance of payments. This has a significant impact on domestic inflation to the detriment of consumers, while those with preferential access to foreign exchange at the official rate capture large rents. A simulation exercise using an economywide model for Malawi considers how the economy responds to different types of foreign exchange shocks under fixed and flexible exchange rate regimes. While the foreign exchange crisis in itself has severe negative implications for the economy, our results suggest that the economy responds much better to these types of shocks under a flexible exchange rate regime (that is, devaluations or a free-floating currency). Our main simulation shows that under the latter policy, gross domestic product growth, although negative, is 1.5 percentage points higher than under a fixed exchange rate policy. Similarly, poverty is 6.9 percentage points lower. A relaxation of the exchange rate policy, however, is only part of the solution; in the longer run, good governance and sound macroeconomic policy that is conducive to growth are needed to address the underlying structural problems in the economy that also contribute to foreign exchange shortages.
Author: Mr.Johan Mathisen Publisher: International Monetary Fund ISBN: 1451852789 Category : Business & Economics Languages : en Pages : 26
Book Description
This paper computes Malawi's equilibrium real exchange rate as a function of its fundamentals as derived from economic theory. It finds evidence in favor of the equilibrium approach to exchange rate determination, with several variables (particularly government consumption and real per capita growth) found to drive movements in the time-varying equilibrium real exchange rate. The results also indicate that following a shock there is a rapid reversion of the real exchange rate to its time-varying equilibrium, with a half-life of reversion of about 11 months.
Author: International Monetary Fund Publisher: International Monetary Fund ISBN: 1451828144 Category : Business & Economics Languages : en Pages : 79
Book Description
The objective for net foreign assets was discussed in this paper. Macroeconomic performance under the PRGF arrangement was broadly discussed. Several developments during the second half of 2005/2006 required the authorities to strengthen financial management controls and to make other policy adjustments. To meet additional humanitarian needs, the government expanded its food security operations. The authorities are working with IMF staff and other stakeholders to redefine pro-poor spending for 2006/2007. The government has taken further steps to ensure the viability of the pension system.
Author: International Monetary Fund. African Dept. Publisher: International Monetary Fund ISBN: Category : Business & Economics Languages : en Pages : 94
Book Description
Malawi has been affected by a series of shocks— including an outbreak of cholera and Cyclone Freddy, which caused significant loss of life and damage to infrastructure—since the approval of the Staff-Monitored Program with Executive Board Involvement (PMB) on November 11, 2022, and the disbursement of $88.3 million in emergency financing under the Food Shock Window of the Rapid Credit Facility on November 21, 2022. In this context, growth has been weaker and inflation higher than expected. The fiscal deficit in FY2022/23 (April/March) was larger than expected at the time of the PMB. Meanwhile, external strains—including shortage of foreign exchange, difficulties securing trade credit, and a widening spread between official and bureau exchange rates—have heightened. Despite a sharp reduction in the current account deficit, accumulation of foreign exchange reserves has been slower than expected, implying an increase in informal trade.
Author: International Monetary Fund Publisher: International Monetary Fund ISBN: Category : Business & Economics Languages : en Pages : 80
Book Description
This paper examines economic developments in Malawi during 1993–97. Following a short recovery in 1993, Malawi’s financial situation deteriorated significantly in early 1994 as increasing problems of expenditure control ahead of its first multiparty elections and administrative problems in revenue collection led a large overall fiscal deficit mainly financed by the banking system. However, Malawi embarked, in early 1995, on an adjustment program designed to reestablish financial stability and set the basis for sustainable economic growth. Since then, the authorities’ efforts have led to a significant transformation of the Malawian economy.
Author: International Monetary Fund Publisher: INTERNATIONAL MONETARY FUND ISBN: 9781451828016 Category : Languages : en Pages : 95
Book Description
This Selected Issues paper estimates the path of the equilibrium real exchange for Malawi. Based on a dynamic model of a small open economy, the paper identifies and discusses the dynamics between certain fundamental variables and the real exchange rate. It also investigates the presence of a long-term relationship between the real exchange rate and the explanatory variables, and estimates both the equilibrium real exchange rate and the speed at which it converges toward its equilibrium level. The paper also discusses episodes of discrepancies between the real effective exchange rate and its equilibrium level.
Author: International Monetary Fund Publisher: International Monetary Fund ISBN: 1498344062 Category : Business & Economics Languages : en Pages : 74
Book Description
Over the past two decades, many low- and lower-middle income countries (LLMICs) have improved control over fiscal policy, liberalized and deepened financial markets, and stabilized inflation at moderate levels. Monetary policy frameworks that have helped achieve these ends are being challenged by continued financial development and increased exposure to global capital markets. Many policymakers aspire to move beyond the basics of stability to implement monetary policy frameworks that better anchor inflation and promote macroeconomic stability and growth. Many of these LLMICs are thus considering and implementing improvements to their monetary policy frameworks. The recent successes of some LLMICs and the experiences of emerging and advanced economies, both early in their policy modernization process and following the global financial crisis, are valuable in identifying desirable features of such frameworks. This paper draws on those lessons to provide guidance on key elements of effective monetary policy frameworks for LLMICs.
Author: Kisu Simwaka
Author: Kisu Simwaka
Author: Exley B. D. Silumbu
Author: Karl Pauw
Author: Mr.Johan Mathisen
Author: International Monetary Fund
Author: International Monetary Fund. African Dept.
Author: International Monetary Fund
Author: International Monetary Fund
Author: Kisukyabo Simwaka
Author: International Monetary Fund