Real exchange rate appreciation, resource boom, and policy reform inMyanmar

Abstract

Over the six‐year period 2006‐11, the real exchange rate of the Myanmar kyat appreciated 200 per cent, resulting in the value of the US dollar in Myanmar falling to one‐third of its pre‐2006 level. While the resource boom is suspected to be the source of the real exchange rate appreciation, administrative controls on foreign exchange and imports had much more impact. Foreign exchange controls limited the convertibility of the kyat to foreign currencies and spurred negotiated transactions of foreign exchange outside the banking sector, hampering the foreign exchange market interventions of the government and Central Bank. Import controls repressed imports, aggravating excess supplies of foreign exchange. Relaxation of administrative controls is necessary for moderating currency appreciation.

Sources of real exchange rate fluctuations in Egypt

“…Moreover, our result is consistent with Morales-Zumaquero (2006), where a country in the transition phase will have demand shocks as the main source of real exchange rate fluctuations. Additionally, Kubo (2013), Drine and Rault (2009) and Sfia (2006) provide similar results, as they examine countries that have similar economic structures to those in Egypt. On the other hand, Apergis and Karfakis (1996) present a result in contrast to our result, as they study the Greek economy, which is similar to the Egypt economy.…”

“…Myanmar has changed its exchange rate regime at different points of time according to Kubo (2013). The change in the regime caused sharp fluctuations in the real exchange rate relative to other South Asian countries' currencies.…”

Myanmar: building economic foundations

“…Because of the foreign exchange market segmentation, the appreciation of the kyat was probably not due to rising foreign exchange earnings from natural gas exports, because these earnings were not available in the private sector market where this rate is determined. Kubo () attributes the appreciation to the repatriation of privately held foreign exchange for conversion into kyat to take advantage of the massive sale of state assets before the transition to the new regime, as well as to private sector earnings from gem sales and exports. The multitude of controls on imports holding back demand for foreign exchange was another major reason.…”

Myanmar: Unlocking the Potential. A Strategy for High, Sustained, and Inclusive Growth

“…Because of foreign exchange market "segmentation," the appreciation of the kyat can probably not be traced to rising foreign exchange earnings due to natural gas exports, since these earnings were not available in the private sector market where this rate is determined. Kubo (2013) attributes the appreciation to the repatriation of privately held foreign exchange for conversion into kyat to take advantage of the massive sale of state assets before the transition to the new regime, as well as to private sector earnings from gem sales and exports. The multitude of controls on imports holding back demand for foreign exchange was another major reason.…”