Abstract:
This paper estimates the real exchange rate misalignment and investigates its impact on economic
performance and competitiveness of Namibia for the period 1970 to 2011 using cointegrated vector
autoregression methods. The results show that there were periods of overvaluation and undervaluation
of the real exchange rate. The analysis reveals that misalignment has a negative impact on the
competitiveness and performance of the economy. Maintaining the real exchange rate out of
equilibrium reduces economic performance and competitiveness. This suggests that policy makers
should monitor the real exchange rate regularly and make the exchange rate policy part of trade
promotion strategy.