Yemen; Exchange Rate Policy in the Face of Dwindling Oil Exports
This paper investigates the likely implications of declining oil production on Yemen's equilibrium exchange rate, and discusses policy options to ensure a smooth transition to a nonoil economy. The empirical results suggest that, as oil production and foreign exchange earnings fall, the Yemeni rial will have to adjust downward in real effective terms to keep pace with the equilibrium exchange rate. In light of strong pass-through from exchange rate depreciation to domestic inflation, this could entail a substantial depreciation in nominal terms. Given the nature of the adjustment, a floating exchange rate regime appears to be the best option, if supported by appropriate macroeconomic policies. However, given public fixation on a exchange rate stability, a softly managed float would be a better option for Yemen whereby the central bank may have to lead the market toward the equilibrium exchange rate.
|Date of creation:||01 Jan 2007|
|Contact details of provider:|| Postal: International Monetary Fund, Washington, DC USA|
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
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.:
- Barry Eichengreen, 2000. "Solving the Currency Conundrum," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 29(3), pages 315-339, November.
- International Monetary Fund, 2003. "The Equilibrium Real Exchange Rate in a Commodity Exporting Country; The Case of Russia," IMF Working Papers 03/93, International Monetary Fund.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, December.
- Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
- Ehsan U. Choudhri & Mohsin S. Khan, 2005.
"Real Exchange Rates in Developing Countries: Are Balassa-Samuelson Effects Present?,"
IMF Staff Papers,
Palgrave Macmillan, vol. 52(3), pages 2.
- Mohsin S. Khan & Ehsan U. Choudhri, 2004. "Real Exchange Rates In Developing Countries; Are Balassa-Samuelson Effects Present?," IMF Working Papers 04/188, International Monetary Fund.
- Ronald MacDonald, 1995.
"Long-Run Exchange Rate Modeling; A Survey of the Recent Evidence,"
IMF Working Papers
95/14, International Monetary Fund.
- Ronald Macdonald, 1995. "Long-Run Exchange Rate Modeling: A Survey of the Recent Evidence," IMF Staff Papers, Palgrave Macmillan, vol. 42(3), pages 437-489, September.
- Khan, Mohsin S. & Ostry, Jonathan D., 1992.
"Response of the equilibrium real exchange rate to real disturbances in developing countries,"
Elsevier, vol. 20(9), pages 1325-1334, September.
- Mohsin S. Khan & Jonathan David Ostry, 1991. "Response of the Equilibrium Real Exchange Rate to Real Disturbances in Developing Countries," IMF Working Papers 91/3, International Monetary Fund.
- Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
- Ratna Sahay & Luis Felipe CÃ©spedes & Paul Cashin, 2002. "Keynes, Cocoa, and Copper; In Search of Commodity Currencies," IMF Working Papers 02/223, International Monetary Fund.
- Serven, Luis & Solimano, Andres, 1992. "Private Investment and Macroeconomic Adjustment: A Survey," World Bank Research Observer, World Bank Group, vol. 7(1), pages 95-114, January.
- Claudio A Paiva, 2001. "Competitiveness and the Equilibrium Exchange Rate in Costa Rica," IMF Working Papers 01/23, International Monetary Fund.
- Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, vol. 90(2), pages 1-16, May.
- Joannes Mongardini, 1998. "Estimating Egyptâ€™s Equilibrium Real Exchange Rate," IMF Working Papers 98/5, International Monetary Fund.
- Taline Koranchelian, 2005. "The Equilibrium Real Exchange Rate in a Commodity Exporting Country; Algeriaâ€™s Experience," IMF Working Papers 05/135, International Monetary Fund.
- Ronald Macdonald & Luca Antonio Ricci, 2004.
"Estimation Of The Equilibrium Real Exchange Rate For South Africa,"
South African Journal of Economics,
Economic Society of South Africa, vol. 72(2), pages 282-304, 06.
- Ronald MacDonald & Luca A Ricci, 2003. "Estimation of the Equilibrium Real Exchange Rate for South Africa," IMF Working Papers 03/44, International Monetary Fund.
- Giavazzi, Francesco & Sheen, Jeff R & Wyplosz, Charles, 1988. "The Real Exchange Rate and the Fiscal Aspects of a Natural Resource Discovery," Oxford Economic Papers, Oxford University Press, vol. 40(3), pages 427-50, September.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:07/5. 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: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.