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The impact of inaccurate channel state information at the transmitter for a variable rate variable power multilevel quadrature amplitude modulation (VRVP-MQAM) system over a Rayleigh flat-fading channel is investigated. A system model is proposed with rate and power adaptation based on the estimates of instantaneous signal-to-noise ratio (SNR) and bit error rate (BER). A pilot symbol assisted modulation scheme is used for SNR estimation. The BER estimator is derived using a maximum a posteriori approach and a simplified closed-form solution is obtained as a function of only the second order statistical characterization of the channel state imperfection. Based on the proposed system model, rate and power adaptation is derived for the optimization of spectral efficiency subject to an average power constraint and an instantaneous BER requirement. The performance of the VRVP-MQAM system under imperfect channel state information (CSI) is evaluated. We show that the proposed VRVP-MQAM system that employs optimal solutions based on the statistical characterization of CSI imperfection achieves a higher spectral efficiency as compared to an ideal CSI assumption based method.