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Does political instability affect exchange rates in Arab Spring countries?

Author

Listed:
  • Taoufik Bouraoui

    (ESC [Rennes] - ESC Rennes School of Business)

  • Helmi Hammami

    (ESC [Rennes] - ESC Rennes School of Business)

Abstract

This article investigates the dynamic relationship between political instability and exchange rates in five Arab Spring countries over the period 1992Q1–2016Q4. We include macroeconomic fundamentals to identify the transmission channels through which political instability may affect exchange rates. Based on VAR and ARDL models, our results report that political instability is associated with a significant drop in the value of domestic currencies of these countries. Economic growth is found to be the key mechanism channel. We find also that the dependence between variables is more emphasized in the short run than in the long run.

Suggested Citation

  • Taoufik Bouraoui & Helmi Hammami, 2017. "Does political instability affect exchange rates in Arab Spring countries?," Post-Print hal-04272222, HAL.
    • Handle: RePEc:hal:journl:hal-04272222
    DOI: 10.1080/00036846.2017.1319561
    as

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