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Tunisia's Experience with Real Exchange Rate Targeting and the Transition to a Flexible Exchange Rate Regime

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Author Info
E. Martin
I. Karpowicz
Nicole Laframboise
Randa Sab
Domenico Fanizza
Abstract

Over the past decade or so, Tunisia has experienced a strong economic performance while pursuing a constant real exchange rate rule (CRERR). The limitations of this rule are now beginning to emerge in the context of a more open economy, regional integration, a more market-based monetary policy, and the desire to relax capital controls. This paper explores how Tunisia avoided the pitfalls of real exchange rate targeting as predicted by the theoretical models. By estimating the equilibrium real exchange rate based on fundamental variables and assessing different measures of competitiveness, the paper finds no evidence of a misalignment in the current level of the exchange rate.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/190.

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Length: 27 pages
Date of creation: 19 Nov 2002
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Handle: RePEc:imf:imfwpa:02/190

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Related research
Keywords: Real effective exchange rates ; Tunisia ; Flexible exchange rates ; Exchange rate regimes ;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Gian Maria Milesi-Ferretti & S. Micossi, 1994. "Real Exchange Rates and the Prices of Nontradable Goods," IMF Working Papers 94/19, International Monetary Fund.
  2. Dominique Desruelle & Alessandro Zanello, 1997. "A Primer on the IMF's Information Notice System," IMF Working Papers 97/71, International Monetary Fund.
  3. Kornelia Krajnyak & Jeromin Zettelmeyer, 1998. "Competitiveness in Transition Economies: What Scope for Real Appreciation?," IMF Staff Papers, Palgrave Macmillan Journals, vol. 45(2), pages 4. [Downloadable!] (restricted)
  4. Tamim Bayoumi & Peter B. Clark & Steven A. Symansky & Leonardo Bartolini, 1994. "Exchange Rates and Economic Fundamentals: A Framework for Analysis," IMF Occasional Papers 115, International Monetary Fund.
  5. Leslie Lipschitz & Donogh McDonald, 1991. "Real Exchange Rates and Competitiveness - A Clarification of Concepts, and Some Measurements for Europe," IMF Working Papers 91/25, International Monetary Fund.
  6. Gian Maria Milesi-Ferretti & Philip R. Lane, 1999. "The External Wealth of Nations - Measures of Foreign Assets and Liabilities for Industrial and Developing Countries," IMF Working Papers 99/115, International Monetary Fund.
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  7. Peter Montiel & Jonathan David Ostry, 1991. "Macroeconomic Implications of Real Exchange Rate Targeting in Developing Countries," IMF Working Papers 91/29, International Monetary Fund.
  8. 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.
  9. Calvo, Guillermo A. & Reinhart, Carmen M. & Vegh, Carlos A., 1995. "Targeting the real exchange rate: theory and evidence," Journal of Development Economics, Elsevier, vol. 47(1), pages 97-133, June. [Downloadable!] (restricted)
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  10. Esteban Jadresic & Paul R. Masson & Paolo Mauro & Michael Mussa & Alexander K. Swoboda & Andrew Berg, 2000. "Exchange Rate Regimes in an Increasingly Integrated World Economy," IMF Occasional Papers 193, International Monetary Fund. [Downloadable!]
  11. Jose De Gregorio & Holger C. Wolf & Alberto Giovannini, 1994. "International Evidence on Tradables and Nontradables Inflation," IMF Working Papers 94/33, International Monetary Fund.
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  12. Stephen Tokarick & Ian W. Marsh, 1994. "Competitiveness Indicators - A Theoretical and Empirical Assessment," IMF Working Papers 94/29, International Monetary Fund.
  13. Lionel Halpern & Charles Wyplosz, 1996. "Equilibrium Exchange Rates in Transition Economies," IMF Working Papers 96/125, International Monetary Fund.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. BEN ALI Mohamed Sami, 2006. "Capital Account Liberalization And Exchange Rate Regime Choice, What Scope For Flexibility In Tunisia?," William Davidson Institute Working Papers Series wp815, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  2. Grand Nathalie & Dropsy Vincent, 2005. "Exchange Rate And Inflation Targeting In Morocco And Tunisia," Macroeconomics 0507018, EconWPA. [Downloadable!]
  3. Ludvig Söderling & Domenico Fanizza, 2006. "Fiscal Determinants of Inflation: A Primer for the Middle East and North Africa," IMF Working Papers 06/216, International Monetary Fund. [Downloadable!]
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