Effect of Exchange Rate Variations on Foreign Trade in Mozambique (1994-2019)
Keywords:
real exchange rate, exports, imports, competitiveness, gross national income.Abstract
This study analyzes the impact of exchange rate variation on Mozambique’s external trade during the period from 1994 to 2019, based on an econometric approach applied to time series data. The research examines the effects of the real exchange rate on exports and imports, also incorporating foreign direct investment (FDI) and gross national income (GNI) as explanatory variables. The results indicate that a depreciation of the real exchange rate has a positive and statistically significant effect on exports, and a negative effect on imports, in line with traditional economic theory. The empirical validity of the J-curve theory is highlighted for the period 2015 to 2016, during which there was a temporary deterioration of the trade balance followed by gradual recovery. The model also reveals a high income elasticity of imports exceeding 2 which underscores the structural dependence of Mozambique’s economy on imported goods. These findings reinforce the need for complementary structural policies, including competitive import substitution and productive diversification, in order to enhance the national economy’s capacity to respond to external shocks and improve trade performance.
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