IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Capital Flows, Real Exchange Rates, and Capital Controls: What Is the Scope of Liberalization for Tunisia?

  • Fatma Marrakchi Charfi

    ()

    (Faculty of Economical and Management Sciences of Tunis, University of Tunis El Manar, Tunisia)

This paper deals with an important aspect of Tunisian economic and political decisions related to the opportunity for currency convertibility. Tunisia has established its current currency convertibility and has taken steps to achieve full convertibility of the dinar by gradually removing capital flow obstacles. Theoretical and empirical literature suggests that capital account liberalization generally leads to capital inflow in developing countries, generating an appreciation in the real exchange rate (RER) and thus a loss in competitiveness. However, preserving competitiveness is a key challenge for monetary authorities, who have to conciliate these two apparently conflicting purposes. To guide their decisions with respect to the prescribed procedure for capital liberalization, we need to evaluate the impact of each capital component flow on the RER. The question is addressed by analysing impulse response functions (IRF) resulting from a VAR model, covering 1970 to 2010 and gathering the RER, its fundamental determinants, monetary variables and an estimated capital control (CC) variable. Results show that a relaxation of CC over-appreciates the RER to its long-term level, and liberalizing portfolio investment is the most compromising for competitiveness.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.panoeconomicus.rs/casopis/2013_4/05%20Fatma%20Marrakchi%20Charfi.pdf
Download Restriction: no

Article provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.

Volume (Year): 60 (2013)
Issue (Month): 4 (June)
Pages: 515-540

as
in new window

Handle: RePEc:voj:journl:v:60:y:2013:i:4:p:515-540
Contact details of provider: Web page: http://www.panoeconomicus.rs/

References listed on IDEAS
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.:

as in new window
  1. Bernard Laurens & Jaime Cardoso, 1998. "Managing Capital Flows; Lessons From the Experience of Chile," IMF Working Papers 98/168, International Monetary Fund.
  2. Geert Bekaert & Campbell R. Harvey, 1995. "Emerging Equity Market Volatility," NBER Working Papers 5307, National Bureau of Economic Research, Inc.
  3. Obstfeld, Maurice, 1986. "Capital mobility in the world economy: Theory and measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 24(1), pages 55-103, January.
  4. Alan M. Taylor, 1996. "International Capital Mobility in History: The Saving-Investment Relationship," NBER Working Papers 5743, National Bureau of Economic Research, Inc.
  5. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
  6. Liliana Rojas-Suárez & Donald J. Mathieson, 1993. "Liberalization of the Capital Account; Experiences and Issues," IMF Occasional Papers 103, International Monetary Fund.
  7. Geert Bekaert & Campbell R. Harvey & Robin L. Lumsdaine, 1999. "The Dynamics of Emerging Market Equity Flows," NBER Working Papers 7219, National Bureau of Economic Research, Inc.
  8. Montiel, Peter J., 1993. "Capital mobility in developing countries : some measurement issues and empirical estimates," Policy Research Working Paper Series 1103, The World Bank.
  9. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 1999. "The External Wealth of Nations: Measures of Foreign Assets and Liabilities for Industrial and Developing Countries," CEPR Discussion Papers 2231, C.E.P.R. Discussion Papers.
  10. Fatma Marrakchi Charfi, 2009. "Euro / dollar : quelle stratégie de change pour la Tunisie ?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 85-114.
  11. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  12. Geert Bekaert & Campbell R. Harvey, 1994. "Time-Varying World Market Integration," NBER Working Papers 4843, National Bureau of Economic Research, Inc.
  13. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc.
  14. Michael Dooley & Jeffrey Frankel & Donald J. Mathieson, 1987. "International Capital Mobility: What Do Saving-Investment Correlations Tell Us?," IMF Staff Papers, Palgrave Macmillan, vol. 34(3), pages 503-530, September.
  15. Yan Bai & Jing Zhang, 2010. "Solving the Feldstein-Horioka Puzzle With Financial Frictions," Econometrica, Econometric Society, vol. 78(2), pages 603-632, 03.
  16. Elbadawi, Ibrahim A. & Soto, Raimundo, 1994. "Capital flows and long-term equilibrium real exchange rates in Chile," Policy Research Working Paper Series 1306, The World Bank.
  17. Frankel, Jeffrey A, 1992. "Measuring International Capital Mobility: A Review," American Economic Review, American Economic Association, vol. 82(2), pages 197-202, May.
  18. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
  19. Murphy, Robert G., 1984. "Capital mobility and the relationship between saving and investment rates in OECD countries," Journal of International Money and Finance, Elsevier, vol. 3(3), pages 327-342, December.
  20. Sophie Bereau, 2007. "Une mesure macroeconomique "a la Feldstein-Horioka" du degre d'integration financiere en Europe," Economie Internationale, CEPII research center, issue 110, pages 63-106.
  21. Frankel, Jeffrey & Wei, Shang-Jin, 2008. "Estimation of De Facto Exchange Rate Regimes: Synthesis of The Techniques for Inferring Flexibility and Basket Weights," Working Paper Series rwp08-026, Harvard University, John F. Kennedy School of Government.
  22. Jonathan David Ostry & Atish R. Ghosh & Karl Friedrich Habermeier & Marcos Chamon & Mahvash Saeed Qureshi & Dennis B. S. Reinhardt, 2010. "Capital Inflows; The Role of Controls," IMF Staff Position Notes 2010/04, International Monetary Fund.
  23. Nikolay Gueorguiev & Pelin Berkmen, 2004. "Macroeconomic Implications of the Transition to Inflation Targeting and Capital Account Liberalization in Romania," IMF Working Papers 04/232, International Monetary Fund.
  24. Michael P. Dooley & Donald J. Mathieson & Liliana Rojas-Suarez, 1997. "Capital Mobility and Exchange Market Intervention in Developing Countries," NBER Working Papers 6247, National Bureau of Economic Research, Inc.
  25. 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.
  26. Feldstein, Martin, 1983. "Domestic saving and international capital movements in the long run and the short run," European Economic Review, Elsevier, vol. 21(1-2), pages 129-151.
  27. Sebastian Edwards & Roberto Rigobon, 2005. "Capital Controls, Exchange Rate Volatility and External Vulnerability," NBER Working Papers 11434, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:voj:journl:v:60:y:2013:i:4:p:515-540. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ivana Horvat)

The email address of this maintainer does not seem to be valid anymore. Please ask Ivana Horvat to update the entry or send us the correct address

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.