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Setting the Stage for a National Currency in the West Bank and Gaza

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Author Info

  • Magda E. Kandil
  • S. Beidas

Abstract

This paper sheds light on the quantitative behavioral responses of key economic variables in the Palestinian economy in the face of major economic shocks and draws implications for the choice of an exchange rate regime should a decision be taken to introduce a national currency. Time-series regression analysis shows that (i) wages and prices are flexible in the face of various shocks; (ii) the real wage appears rigid in the face of various shocks and increases despite higher unemployment; (iii) an appreciation of the new Israeli Sheqalim real effective exchange rate decreases exports and imports; and (iv) money demand appears stable in the face of exchange rate shocks. Although a fixed exchange rate system may initially be desirable to establish credibility of the new currency, some flexibility of the exchange rate is desirable over time.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/70.

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Length: 34
Date of creation: 01 Apr 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/70

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Related research

Keywords: Exchange rate regimes; West Bank and Gaza; Currency substitution; exchange rate; inflation; wage inflation; price inflation; exchange rate regime; fixed exchange rate; exchange rate system; real wages; real effective exchange rate; effective exchange rate; monetary policy; fixed exchange rate system; exchange rate flexibility; foreign exchange; exchange rates; exchange rate fluctuations; flexible exchange rate; fixed exchange rate regime; relative price; exchange rate shocks; dollar exchange rate; price stability; euro exchange rate; flexible exchange rate system; exchange rate management; inflation rates; exchange rate rigidity; relative prices; real national income; nominal interest rate; exchange rate stability; inflationary expectations; exchange rate arrangements; exchange rate increases; exchange rate level; basket of currencies; aggregate demand; floating exchange rate regime; nominal exchange rate; high inflation; rate of inflation; floating exchange rate; history of exchange rate; foreign exchange market; inflation targeting; money supply; flexible exchange rate regime; relative exchange rates; exchange reserves; east asian miracle; exchange arrangements; foreign exchange reserves; exchange auctions; high-frequency exchange rates; foreign currency; real exchange rate; exchange rate risk; fixed exchange rates; foreign exchange auctions;

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References

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  1. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 73-96, Fall.
  2. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 1-48, February.
  3. repec:imf:imfpdp:9312 is not listed on IDEAS
  4. Kent Osband & Delano Villanueva, 1992. "Independent Currency Authorities," IMF Working Papers 92/50, International Monetary Fund.
  5. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
  6. Richard K. Abrams, 1995. "The Design and Printing of Bank Notes," IMF Working Papers 95/26, International Monetary Fund.
  7. Jonathan David Ostry & Anne Marie Gulde & Atish R. Ghosh & Holger C. Wolf, 1995. "Does the Nominal Exchange Rate Regime Matter?," IMF Working Papers 95/121, International Monetary Fund.
  8. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 7-46, 04.
  9. Rina Bhattacharya, 2003. "Exchange Rate Regime Considerations for Jordan and Lebanon," IMF Working Papers 03/137, International Monetary Fund.
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Cited by:
  1. Tigran Poghosyan & Samya Beidas-Strom, 2011. "An Estimated Dynamic Stochastic General Equilibrium Model of the Jordanian Economy," IMF Working Papers 11/28, International Monetary Fund.

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