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Capital Account Liberalization And Exchange Rate Regime Choice, What Scope For Flexibility In Tunisia?

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  • BEN ALI Mohamed Sami

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    Abstract

    Capital account liberalization and exchange rate regime choice, what scope for flexibility in Tunisia? This study evaluates within a game-theoretic framework the exchange rate regime from a welfare perspective. In a tradable-nontradable goods model framework, Tunisia’s exchange rate regime choice is cast in terms of strategic interactions between the monetary authority and domestic enterprises. The monetary authority is assumed to choose an optimal exchange rate regime according to a welfare-related criterion by minimising a loss function defined in terms of external competitiveness and domestic inflation. Simulations outcomes reveal that capital account liberalization in the Tunisian economic context is compatible with a flexible exchange rate regime.

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    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp815.

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    Length: pages
    Date of creation: 01 Mar 2006
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    Handle: RePEc:wdi:papers:2006-815

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    Keywords: Exchange rate regime; Liberalization; Convertibility; Capital Account; Welfare; Tunisia.;

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