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Tunisia’s Experience with Real Exchange Rate Targeting and the Transition to a Flexible Exchange Rate Regime

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  • International Monetary Fund

Abstract

Over the past decade or so, Tunisia has experienced a strong economic performance while pursuing a constant real exchange rate rule (CRERR). The limitations of this rule are now beginning to emerge in the context of a more open economy, regional integration, a more market-based monetary policy, and the desire to relax capital controls. This paper explores how Tunisia avoided the pitfalls of real exchange rate targeting as predicted by the theoretical models. By estimating the equilibrium real exchange rate based on fundamental variables and assessing different measures of competitiveness, the paper finds no evidence of a misalignment in the current level of the exchange rate.

Suggested Citation

  • International Monetary Fund, 2002. "Tunisia’s Experience with Real Exchange Rate Targeting and the Transition to a Flexible Exchange Rate Regime," IMF Working Papers 02/190, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:02/190
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    Cited by:

    1. International Monetary Fund, 2007. "Tunisia; Selected Issues," IMF Staff Country Reports 07/319, International Monetary Fund.
    2. Adnen Chockri & Ibticem Frihka, 2011. "La portée de la politique de ciblage d’inflation: Approche analytique et empirique pour le cas Tunisien," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(1), pages 91-111, March.
    3. Ludvig Söderling & Domenico Fanizza, 2006. "Fiscal Determinants of Inflation; A Primer for the Middle East and North Africa," IMF Working Papers 06/216, International Monetary Fund.
    4. Grand Nathalie & Dropsy Vincent, 2005. "Exchange Rate And Inflation Targeting In Morocco And Tunisia," Macroeconomics 0507018, EconWPA.
    5. Leila Baghdadi & Hendrik Kruse & Inma Martínez-Zarzoso, 2015. "An Estimation of Traiff Pass-Through in Tunisia," Working Papers 963, Economic Research Forum, revised Oct 2015.
    6. Mourad Zmami & Ousama Ben-Salha, 2015. "Exchange rate movements and manufacturing employment in Tunisia: Do different categories of firms react similarly?," Economic Change and Restructuring, Springer, vol. 48(2), pages 137-167, May.
    7. Hend Sfaxi Benahji, 2008. "Choice of the Exchange Policies in the Developments Countries: Study of the Competitiveness of Tunisia," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 55(3), pages 353-367, September.
    8. World Bank, 2006. "Fostering Higher Growth and Employment in the Kingdom of Morocco," World Bank Publications, The World Bank, number 7114, April.
    9. BEN ALI Mohamed Sami, 2006. "Capital Account Liberalization And Exchange Rate Regime Choice, What Scope For Flexibility In Tunisia?," William Davidson Institute Working Papers Series wp815, William Davidson Institute at the University of Michigan.
    10. Fatma Marrakchi Charfi, 2008. "Equilibrium real exchange rate and misalignments : Lessons from a VAR-ECM model applied to Tunisia," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 55(4), pages 439-464, December.

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    Keywords

    Foreign exchange; Tunisia; Real exchange rate target; exchange rate; real exchange rate; inflation; terms of trade;

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