Botswana's crawling-peg exchange rate system: trends and variations in the pula exchange rate

Abstract

This paper aims to show trends and variations in the Botswana Pula exchange rate before and after the introduction of the crawling-peg exchange rate system. The survey indicates that previous devaluations not accompanied by the crawling-peg exchange rate system were short-lived. It is shown that since the adoption of the crawling-peg exchange rate system the Pula has been depreciating. Additionally, the variance and the standard deviation revealed that variations in the nominal bilateral Pula exchange rates have been minimal since the adoption of the crawling-peg exchange rate system. To corroborate the foregoing, both the variance and the standard deviation are computed for the nominal and real effective exchange rate of the pula against major currencies using quarterly data. The findings also suggest that the variations have been minimal after the crawling peg. This is shown by small variance and the standard deviation of both the nominal and real effective exchange rates. This implies stability in the Pula exchange rate and positive results of the crawling-peg exchange rate policy regime.