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Working Paper 240 - The Impact of the Real Exchange Rate Changes on Export Performance in Tanzania and Ethiopia

30-aoû-2016

This paper investigates the impact of real exchange rate changes on the export performances of Ethiopia and Tanzania. Both countries have gone through a process of liberalisation including significant changes in both the nominal and real exchange rate. In the case of Tanzania, the exchange rate liberalisation process started in 1982 with a 10% currency devaluation followed by further devaluations by 20% and 26% in 1983 and 1984 respectively1 . These devaluations were regarded by aid donors to be insufficient to deal with the problem of overvaluation and resulted in a stand-off period before Tanzania finally agreed to IMF conditions for a substantial real devaluation in 1986 followed by an ongoing process of exchange rate depreciation. Ethiopia maintained a fixed exchange rate until 1992 when a substantial devaluation took place followed by ongoing depreciation (Taye 1999).

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