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Equilibrium real exchange rate and misalignments : Lessons from a VAR-ECM model applied to Tunisia

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  • Fatma Marrakchi Charfi

    ()
    (Facult 0064es Sciences Economiques et de Gestion de Tunis. Universit 0064e Tunis El Manar)

Abstract

Tunisia has experienced a performance when pursuing a constant real exchange rate rule. The limitations of this rule are beginning to emerge in the context of a more open economy, which desire to relax capital controls. This paper estimates the equilibrium real exchange rate of the dinar vis 0076is the euro and the $US from 1983 to 2000, using quarterly data, based on the following fundamental variables: terms of trade, net capital inflows and the differential of productivity. Results show that Tunisian dinar was overvalued before the 1986 devaluation, becomes close to its equilibrium value over the 90s. In the beginning of this century (2000), authorities permit a larger fluctuation of the real effective exchange rate.

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Bibliographic Info

Article provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.

Volume (Year): 55 (2008)
Issue (Month): 4 (December)
Pages: 439-464

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Handle: RePEc:voj:journl:v:55:y:2008:i:4:p:439-464

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Web page: http://www.panoeconomicus.rs/

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Keywords: Equilibrium real exchange rate; Misalignment; Cointegration;

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  1. Peter Montiel & Jonathan David Ostry, 1991. "Macroeconomic Implications of Real Exchange Rate Targeting in Developing Countries," IMF Working Papers 91/29, International Monetary Fund.
  2. Hamid Faruqee, 1995. "Long-Run Determinants of the Real Exchange Rate: A Stock-Flow Perspective," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 80-107, March.
  3. Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107.
  4. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  5. Hinkle, Lawrence E. & Monteil, Peter J. (ed.), 1999. "Exchange Rate Misalignment: Concepts and Measurement for Developing Countries," OUP Catalogue, Oxford University Press, number 9780195211269.
  6. Martine Guerguil & Martin David Kaufman, 1998. "Competitiveness and the Evolution of the Real Exchange Rate in Chile," IMF Working Papers 98/58, International Monetary Fund.
  7. International Monetary Fund, 2002. "Tunisia's Experience with Real Exchange Rate Targeting and the Transition to a Flexible Exchange Rate Regime," IMF Working Papers 02/190, International Monetary Fund.
  8. Cottani, Joaquin A & Cavallo, Domingo F & Khan, M Shahbaz, 1990. "Real Exchange Rate Behavior and Economic Performance in LDCs," Economic Development and Cultural Change, University of Chicago Press, vol. 39(1), pages 61-76, October.
  9. Ghiath Shabsigh & Ilker Domaç, 1999. "Real Exchange Rate Behavior and Economic Growth," IMF Working Papers 99/40, International Monetary Fund.
  10. Elbadawi, Ibrahim A. & Soto, Raimundo, 1994. "Capital flows and long-term equilibrium real exchange rates in Chile," Policy Research Working Paper Series 1306, The World Bank.
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Cited by:
  1. Brixiova, Zuzana & Égert, Balázs & Hadj Amor Essid, Thouraya, 2013. "The Real Exchange Rate and External Competitiveness in Egypt, Morocco and Tunisia," IZA Discussion Papers 7822, Institute for the Study of Labor (IZA).
  2. Zuzana Brixiova & Balázs Égert & Thouraya Hadj Amor Essid, 2013. "Working Paper 187 - The Real Exchange Rate and External Competitiveness in Egypt, Morocco and Tunisia," Working Paper Series 991, African Development Bank.

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