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The Impact of Oil-Related Income on the Equilibrium Real Exchange Rate in Syria

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Author Info
Maher Hasan
Jemma Dridi
Abstract

This paper examines the impact of oil-related income, among other fundamentals, on the equilibrium real effective exchange rate (ERER) in Syria. After reviewing the evolution of the Syrian multiple exchange rate regime since 1960 and assessing alternative measures for the exchange rate, the paper analyzes the impact of oil-related income on the ERER in the context of a behavioral equilibrium exchange rate model. The analysis concludes that ERER appreciates with higher oil-related income, productivity and net foreign assets, but, at odds with the conventional wisdom, depreciates with higher government expenditures given that an increase in expenditures usually translates into higher imports and weaker current account position. In light of the projected real shocks associated with the depletion of oil and the change in other fundamentals in the context of the ongoing transition to a market economy, a more flexible regime would serve Syria better in the future.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/196.

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Length: 30 pages
Date of creation: 18 Aug 2008
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Handle: RePEc:imf:imfwpa:08/196

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Keywords: Syrian Arab Republic ; Real effective exchange rates ; Oil production ; Oil revenues ; Productivity ; Government expenditures ; Imports ; Current account balances ; External shocks ; Exchange systems ; Working Paper ;

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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.:
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  4. Ravn, Morten O. & Schmitt-Grohé, Stephanie & Uribe, Martín, 2007. "Explaining the Effects of Government Spending Shocks on Consumption and the Real Exchange Rate," CEPR Discussion Papers 6541, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Luca Antonio Ricci & Ronald MacDonald, . "PPP and the Balassa Samuelson Effect: The Role of the Distribution Sector," IMF Working Papers 01/38, International Monetary Fund. [Downloadable!]
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  6. Monacelli, Tommaso, 2004. "Into the Mussa puzzle: monetary policy regimes and the real exchange rate in a small open economy," Journal of International Economics, Elsevier, vol. 62(1), pages 191-217, January. [Downloadable!] (restricted)
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  10. Juan Zalduendo, 2006. "Determinants of Venezuela's Equilibrium Real Exchange Rate," IMF Working Papers 06/74, International Monetary Fund. [Downloadable!]
  11. Mussa, Michael, 1986. "Nominal exchange rate regimes and the behavior of real exchange rates: Evidence and implications," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 117-214, January. [Downloadable!] (restricted)
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Cited by:
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  1. Klaus-Stefan Enders, 2009. "Exchange Rate Assessment for Oil Exporters," IMF Working Papers 09/81, International Monetary Fund. [Downloadable!]
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