IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Exchange Rate Undervaluation And Manufactured Exports: A Deliberate Strategy?

  • Ridha Nouira
  • Patrick Plane
  • Khalid Sekkat


    (Université Libre de Bruxelles (U.L.B), Belgium)

Recent literature suggests that a proactive strategy consisting of deliberate real exchange rate depreciation can promote exports diversification and growth. This paper is built on these recent developments and investigates whether four developing countries have adopted such a strategy. Data from Egypt, Jordan, Morocco and Tunisia are used to construct and compare the macroeconomic real effective exchange rate (REER), similar exchange rates at the sector level (SREER) and the macroeconomic Equilibrium Real Effective exchange rate (EREER). It shows that there are instances where the objective of diversifying exports through depreciation of exchange rate comes at the expense of further misalignment (REER departs from the EREER) and, then, monetary authorities are doomed to choose. The results show that Morocco and Tunisia are choosing the proactive exchange rate strategy while Egypt and Jordan are not. This fits with the observation that the former are doing much better than the latter in terms of exports diversification.

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:
Download Restriction: no

File URL:
Download Restriction: no

Paper provided by Economic Research Forum in its series Working Papers with number 510.

in new window

Length: 31 pages
Date of creation: Mar 2010
Date of revision: Mar 2010
Publication status: Published by The Economic Research Forum (ERF)
Handle: RePEc:erg:wpaper:510
Contact details of provider: Postal:
21 Al-Sad Al Aaly St. Dokki, Giza

Phone: 202-3370810
Fax: 202-3616042
Web page:

More information through EDIRC

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. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  2. Kiminori Matsuyama, 1990. "Agricultural Productivity, Comparative Advantage, and Economic Growth," Discussion Papers 934, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Yoosoon Chang, 2000. "Nonlinear IV Unit Root Tests in Panels with Cross-Sectional Dependency," CIRJE F-Series CIRJE-F-85, CIRJE, Faculty of Economics, University of Tokyo.
  4. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  5. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
  6. Benjamin F. Jones & Benjamin A. Olken, 2008. "The Anatomy of Start-Stop Growth," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 582-587, August.
  7. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  8. Simon Johnson & Jonathan D Ostry & Arvind Subramanian, 2010. "Prospects for Sustained Growth in Africa: Benchmarking the Constraints," IMF Staff Papers, Palgrave Macmillan, vol. 57(1), pages 119-171, April.
  9. Khalid Sekkat & Aristomène Varoudakis, 1998. "Exchange-Rate Management and Manufactured Exports in Sub-Saharan Africa," OECD Development Centre Working Papers 134, OECD Publishing.
  10. Hausmann, Ricardo & Pritchett, Lant & Rodrik, Dani, 2004. "Growth Accelerations," CEPR Discussion Papers 4538, C.E.P.R. Discussion Papers.
  11. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Department of Economics Working Papers 2000-02, Department of Economics, Williams College.
  12. Hyungsik Roger MOON & Benoit PERRON, 2002. "Testing For A Unit Root In Panels With Dynamic Factors," Cahiers de recherche 18-2002, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  13. Linda S. Goldberg, 2004. "Industry-specific exchange rates for the United States," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 1-16.
  14. Freund, Caroline & Pierola, Martha Denisse, 2008. "Export surges : the oower of a competitive currency," Policy Research Working Paper Series 4750, The World Bank.
  15. Sebastian Edwards, 1998. "The Mexican Peso Crisis: How Much Did We Know? When Did We Know It?," The World Economy, Wiley Blackwell, vol. 21(1), pages 1-30, 01.
  16. Ghura, Dhaneshwar & Grennes, Thomas J., 1993. "The real exchange rate and macroeconomic performance in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 42(1), pages 155-174, October.
  17. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(03), pages 597-625, June.
  18. Pesaran, M. Hashem, 2004. "General Diagnostic Tests for Cross Section Dependence in Panels," IZA Discussion Papers 1240, Institute for the Study of Labor (IZA).
  19. Christophe Hurlin, 2005. "Un test simple de l'hypothèse de non-causalité dans un modèle de panel hétérogène," Revue économique, Presses de Sciences-Po, vol. 56(3), pages 799-809.
  20. Ofair Razin & Susan M. Collins, 1997. "Real Exchange Rate Misalignments and Growth," International Finance 9707001, EconWPA.
  21. Dani Rodrik, 2008. "The Real Exchange Rate and Economic Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 365-439.
  22. Eichengreen, Barry, 2007. "Comment on Cheung, Chinn and Fujii, "The Overvaluation of Renminbi Undervaluation"," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 786-787, September.
  23. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
  24. Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2007. "The Overvaluation of Renminbi Undervaluation," CESifo Working Paper Series 1918, CESifo Group Munich.
  25. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17, January.
  26. Barisone, G. & Driver, R.L. & Wren-Lewis, S., 2000. "Are Our FEERs Justified?," Discussion Papers 0002, Exeter University, Department of Economics.
  27. Ofair Razin & Susan M. Collins, 1997. "Real Exchange Rate Misalignments and Growth," NBER Working Papers 6174, National Bureau of Economic Research, Inc.
  28. Rodrik, Dani, 1986. "Disequilibrium exchange rates as industrialization policy," Journal of Development Economics, Elsevier, vol. 23(1), pages 89-106, September.
  29. Cottani, Joaquin A & Cavallo, Domingo F & Khan, M Shahbaz, 1990. "Real Exchange Rate Behavior and Economic Performance in LDCs," Economic Development and Cultural Change, University of Chicago Press, vol. 39(1), pages 61-76, October.
  30. repec:hoo:wpaper:e-92-3 is not listed on IDEAS
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:erg:wpaper:510. 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: (Namees Nabeel)

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.