Monetary Economics
THE UNIVERSITY OF DODOMA
A RESEARCH PROPOSAL
ON THE TOPIC
Factors influencing Tanzania devaluation policy in its international trade
BY
NYERERE, LAZARO – T/UDOM/2010/03542
Table of Contents 1. INTRODUCTION 2 1.1. Background Information 2 1.2. Statement of the Problem 3 1.3. Justification of the Study 3 1.4. Overall Objective 4 1.5. Specific Objectives 4 1.6. Research Questions 4 1.7. Significance of the Study 4 2. LITERATURE REVIEW 5 2.1 Exchange rate analysis 5 2.2 The nominal effective exchange rate 6 2.3 The real effective exchange rate 6 3. METHODOLOGY 6 3.1 Methods of Data Collection 6 3.2 Methods of Data Analysis 6 3.2.1 Factors affecting balance of payments 6 RESEARCH BUDGET 8 TENTATIVE TIMEBLE 10 REFERENCES 11
1. INTRODUCTION 1.1. Background Information
In most economies that are termed as small and open, the Central Bank targets the value of the nominal exchange rate by intervening in the foreign currency market. In developing countries it has been traumatic episodes and surrounded by political instability and upheaval (Edward S, 1989). It is convenient to devalue the domestic currency following the existence of price stickiness (Hevia C & Nicolini J,P 2009).Countries can devalue their currencies if they have no other way to correct past economic mistakes, whether their own or mistakes done by predecessors, sometimes they can be forced to devalue their currencies due to ominous trade deficits like Thailand, Mexico, Czech Republic where they devalued strongly, willingly or unwillingly after their trade deficits exceeded 8% of the GDP (Vaknin 2004).
In Africa most of the countries undergo devaluation to make adjustments of their economy. According to Jain.CA, 2012 countries devalue their currency because of; Inflation, Strengthening of Dollars, Dollar Demand from Stock Markets, and Fiscal Deficit. With devaluation policy, Tanzanian with an open economy, had an international
A RESEARCH PROPOSAL
ON THE TOPIC
Factors influencing Tanzania devaluation policy in its international trade
BY
NYERERE, LAZARO – T/UDOM/2010/03542
Table of Contents 1. INTRODUCTION 2 1.1. Background Information 2 1.2. Statement of the Problem 3 1.3. Justification of the Study 3 1.4. Overall Objective 4 1.5. Specific Objectives 4 1.6. Research Questions 4 1.7. Significance of the Study 4 2. LITERATURE REVIEW 5 2.1 Exchange rate analysis 5 2.2 The nominal effective exchange rate 6 2.3 The real effective exchange rate 6 3. METHODOLOGY 6 3.1 Methods of Data Collection 6 3.2 Methods of Data Analysis 6 3.2.1 Factors affecting balance of payments 6 RESEARCH BUDGET 8 TENTATIVE TIMEBLE 10 REFERENCES 11
1. INTRODUCTION 1.1. Background Information
In most economies that are termed as small and open, the Central Bank targets the value of the nominal exchange rate by intervening in the foreign currency market. In developing countries it has been traumatic episodes and surrounded by political instability and upheaval (Edward S, 1989). It is convenient to devalue the domestic currency following the existence of price stickiness (Hevia C & Nicolini J,P 2009).Countries can devalue their currencies if they have no other way to correct past economic mistakes, whether their own or mistakes done by predecessors, sometimes they can be forced to devalue their currencies due to ominous trade deficits like Thailand, Mexico, Czech Republic where they devalued strongly, willingly or unwillingly after their trade deficits exceeded 8% of the GDP (Vaknin 2004).
In Africa most of the countries undergo devaluation to make adjustments of their economy. According to Jain.CA, 2012 countries devalue their currency because of; Inflation, Strengthening of Dollars, Dollar Demand from Stock Markets, and Fiscal Deficit. With devaluation policy, Tanzanian with an open economy, had an international
References: CAR, M. (2000). Devaluation in Developing Countries:Expansionary or Contractionary? Economic and Social Research, 2(59-83). AfDB. (2011). Inflation Dynamics in selected East African countries: Ethiopia, Kenya, Tanzania and Uganda. African Development Bank. BOT. (2010). Financial stability Report. Government institution, Financial Sector Stability Department. Dar es Salaam: Bank Of Tanzania. Edwards, S. (1989). Exchange Controls, Devaluations, and Real Exchande Rates:The Latin American Experiance. The University of Chacago. Farhi, E. et al. (2011). Fiscal Devaluations. Frederick, N Hevia, C. and Nicolin J.P. (2009). Optimal Devaluations. World Bank Development Research Group. Jain, C. A. (2012). Currency Devaluation Hammers India. New Delhi: Skipper House and Pusa Road. Mutti, R. M. (2004). International Economics (6th ed.). London and New York: Taylor & Francis e-Library. Rutasitara, L. (2004). Exchange rate regimes and inflation in Tanzania. Nairobi: African Economic Research Consortium. Stambuli, P. K. (1998). Revisiting a Policy of Currency Devaluation in African Countries. Daily Scholarly Article . Vaknin, S. (2004). How Do Other Countries Devalue Thier Currencies? Velasco A Wobst, P. (2001). STRUCTURAL ADJUSTMENT AND INTERSECTORAL SHIF TS IN TANZANIA:A COMPUTABLE GENERAL EQUILIBRIUM ANALYSIS. International Food Policy Research Institute, WASHINGTON, D.C.