The Behaviors And Dynamics Of The Real Exchange Rate Of The Birr After The Economic Reform

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The paper adopts a single equation approach to examine the real exchangernrate behavior and exchange rate misalignment after devaluation andrnforeign exchange I' ate liberalization. The paper finds that real exchangernrate and the macroeconomic fundamentals affecting real exchange rate arernco integrated. It also shows that devaluation, foreign exchange marketrnliberalization and some of the policy measures taken by government suchrnas reducing government consumption and deficit, new investment policyrnand other measures that increase the capital il'iflow narrow the gaprnbetween the parallel market foreign exchange rate and the official marketrnforeign exchange rate, make the behavior of the real exchange rate fairlyrnvariable. In other words, the misalignment of the real exchange raterndeclines and the exchange rate movement becomes more stable. These arernthe desired goals that could be achieved by the devaluation of the exchangernrate and through foreign exchange rate liberalization.

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The Behaviors And   Dynamics Of The Real Exchange Rate Of The Birr After The Economic Reform

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