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Exchange Rate Behaviour in an Oil-Dependent Economy: The Experience of the Sudanese Dinar

Author

Listed:
  • Marial A. Yol

    (Department of Economics, University of Juba, Sudan & Department of Economics, Universiti Putra Malaysia, Malaysia.)

Abstract

The objective of this paper is to estimate the extent of exchange rate misalignment in the Sudan over period 1970-2005. The bounds test finds two cointegrating relations when nominal and world price index are the dependent variables. The long-run coefficients indicate that nominal exchange rates were jointly determined by the world and domestic prices. The significant error-correction term implies that approximately 65% of total disequilibrium in nominal exchange rate was being corrected in each year in Sudan. The evidence strongly indicates that oil perpetuated the recent dinar appreciation thought to be responsible for poor performance of traditional non-oil exports.

Suggested Citation

  • Marial A. Yol, 2009. "Exchange Rate Behaviour in an Oil-Dependent Economy: The Experience of the Sudanese Dinar," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 44(1), pages 69-88, July.
  • Handle: RePEc:dse:indecr:v:44:y:2009:i:1:p:69-88
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    More about this item

    Keywords

    PPP hypothesis; Bounds Test; Exchange Rate Misalignment; Dutch Disease; Sudan;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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