This paper explores the impact of nominal exchange rate devaluation on the trade balance for Malawi. A small-open economy IS-LM aggregate supply model of Malawi estimated using time series data covering the period 1967-96 is used in the simulation analysis. The results of the simulation experiment show that devaluation helps to improve export performance and to curtail the growth of imports in the long run, which lead to improvement in the trade balance position. The results provide evidence supporting the view that nominal devaluation can indeed be a quite powerful tool in minimizing the imbalances in Malawi's international trade.
|Number of pages||14|
|Journal||African Development Review|
|Publication status||Published - Dec. 2003|