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Determinants of real exchange rate misalignment: An empirical analysis for MENA region

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  • Slimani, Slah
  • Ben Allem, Khawla

Abstract

The purpose of this paper is to explain the magnitude of the misalignment of the real exchange rate and its determinants for the MENA countries. Misalignment is defined as the deviation of the real exchange rate from its equilibrium level, unlike volatility which is defined as fluctuations that are very frequent but do not persist. Through this study, an attempt is made to broaden the traditional analysis, focusing mainly on the role of the exchange rate regimes on misalignment of the REER. On the same point of view, the roles of the persistence of misalignment, the quality of institutions, financial development and inflation in the misalignment of the real equilibrium exchange rate of the region. The results of the empirical analysis show that the most advantageous exchange rate regime for the MENA countries is the floating regime. Also, the quality of institutions, financial development and inflation are determinants of the shift of the REER from its equilibrium value.

Suggested Citation

  • Slimani, Slah & Ben Allem, Khawla, 2018. "Determinants of real exchange rate misalignment: An empirical analysis for MENA region," MPRA Paper 91605, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:91605
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    File URL: https://mpra.ub.uni-muenchen.de/91605/1/MPRA_paper_91605.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    MENA countries; Misalignment; Real exchange rate; GMM; Panel data; Determinants;
    All these keywords.

    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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