Madagascar: A Competitiveness and Exchange Rate Assessment

Abstract

The purpose of this paper is to assess Madagascar's competitiveness in recent years, using both price and nonprice indicators and an exchang e rate assessment of the currency. We estimate the distance between th e equilibrium and the actual real exchange rates using three methods: the macroeconomic balance approach, the external sustainability approa ch, and the reduced-form equilibrium real exchange rate approach. Thes e methods suggest that in the medium term the real exchange rate is on ly slightly overvalued. We also carry out a comparative analysis of no nprice indicators and find that Madagascar performs less favorably tha n its competitors on structural competitiveness.