Macroeconomic Fluctuations in Botswana
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This paper documents some empirical regularities in Botswana's macroeconomic variables. The facts we document include the volatility and persistence in and the co-movement among output and other major real and nominal variables. Output is more volatile in Botswana than in industrialised countries, but is consistent with evidence from emerging economies. Exports are the most volatile components of aggregate spending. Cross-correlations between non-mineral private output and a large group of macroeconomic variables (including money, Government spending, interest rate, inflation, consumption and exchange rates) are presented. The paper also analyses the effects of external conditions on Botswana's output fluctuations. The results suggest that the main sources of macroeconomic fluctuations are world oil prices, monetary aggregates, prices and nominal exchange rates. World oil prices and inflation are strongly counter-cyclical. This lends support to the view that supply-side determined business cycle models are more relevant for Botswana than the conventional demand-driven models.
Keywords: Macroeconomic fluctuations, external conditions, components of spending, monetary and financial variables.