Impact of real exchange rate fluctuations on the Mozambican economy (1994 - 2021)
Keywords:
Exchange Rate Variation, GDP, Inflation, Autoregressive Vector.Abstract
This study examines the impact of real exchange rate variation on the Mozambican economy over the period 1994 to 2021, with a focus on long-term relationships with Gross Domestic Product (GDP) and inflation. The research adopts an econometric approach based on time series analysis, employing unit root tests, Johansen cointegration, and Vector Error Correction Models (VECM), derived from Vector Autoregressive (VAR) specifications. Upon confirming the existence of at least one cointegration vector, VECM models were estimated for GDP and inflation as functions of the real exchange rates of the metical against the US dollar (MZN/USD) and the South African rand (MZN/ZAR), suggesting the possibility of a long-run equilibrium relationship. However, the estimated VECM models did not reveal statistically significant relationships between the real exchange rate and GDP, nor between the real exchange rate and inflation, indicating the absence of systematic long-term effects of exchange rate fluctuations on Mozambique’s economic performance. It is concluded that the exchange rate, in isolation, has limited effectiveness as an economic policy instrument in Mozambique, and that the adoption of complementary structural policies is necessary.
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References
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