IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/127389.html

Real Exchange Rate and Economic Growth in Tunisia

Author

Listed:
  • Souibgui, Moez
  • Abida, Zouheir

Abstract

This study examines the relationship between the real effective exchange rate (REER) and economic growth in Tunisia from 1980 to 2011, using the Generalized Method of Moments (GMM). The analysis incorporates key macroeconomic variables, including initial GDP per capita, investment, public expenditure, trade openness, and human capital, to assess their impact on economic performance. The results indicate that real exchange rate depreciation has a negative but statistically insignificant effect on growth. While depreciation may enhance external competitiveness and stimulate exports, its impact remains contingent on import costs and inflationary pressures. Conversely, trade openness and human capital have positive and statistically significant effects, reinforcing the argument that economic liberalization and investment in human capital are crucial drivers of growth. Public expenditure, however, shows a negative and significant relationship with growth, suggesting potential inefficiencies in fiscal policy. These findings highlight the importance of exchange rate management, investment policies, and trade liberalization in fostering economic development. Policymakers should prioritize structural reforms, technology transfer, and private investment to enhance long-term growth prospects. The study’s insights are particularly relevant for other developing economies seeking to optimize exchange rate policies and economic strategies to achieve sustainable growth.

Suggested Citation

  • Souibgui, Moez & Abida, Zouheir, 2025. "Real Exchange Rate and Economic Growth in Tunisia," MPRA Paper 127389, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:127389
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/127389/1/MPRA_paper_127389.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Paramita Mukherjee & Sahana Roy Chowdhury & Poulomi Bhattacharya, 2021. "Does financial liberalization lead to financial development? Evidence from emerging economies," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 30(8), pages 1263-1287, November.
    2. Waqar Khalid & Javed Iqbal & Nosheen Nasir & Misbah Nosheen, 2024. "Do real exchange rate misalignments have threshold effects on economic growth? Asymmetric evidence from Pakistan," Economic Change and Restructuring, Springer, vol. 57(6), pages 1-40, December.
    3. Gang Liu, 2011. "Measuring the Stock of Human Capital for Comparative Analysis: An Application of the Lifetime Income Approach to Selected Countries," OECD Statistics Working Papers 2011/6, OECD Publishing.
    4. Hahn, Jinyong & Hausman, Jerry & Kuersteiner, Guido, 2007. "Long difference instrumental variables estimation for dynamic panel models with fixed effects," Journal of Econometrics, Elsevier, vol. 140(2), pages 574-617, October.
    5. Firat Demir & Arslan Razmi, 2022. "The Real Exchange Rate And Development Theory, Evidence, Issues And Challenges," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 386-428, April.
    6. Hai Long Vo & Duc Hong Vo, 2023. "The purchasing power parity and exchange‐rate economics half a century on," Journal of Economic Surveys, Wiley Blackwell, vol. 37(2), pages 446-479, April.
    7. Luis Felipe Céspedes & Roberto Chang & Andrés Velasco, 2004. "Balance Sheets and Exchange Rate Policy," American Economic Review, American Economic Association, vol. 94(4), pages 1183-1193, September.
    8. Aman, Zunaira & Mallick, Sushanta & Nemlioglu, Ilayda, 2022. "Currency regimes and external competitiveness: the role of institutions, trade agreements and monetary frameworks," Journal of Institutional Economics, Cambridge University Press, vol. 18(3), pages 399-428, June.
    9. Mounir Dahmani & Mohamed Mabrouki & Adel Ben Youssef, 2022. "ICT, trade openness and economic growth in Tunisia: what is going wrong?," Economic Change and Restructuring, Springer, vol. 55(4), pages 2317-2336, November.
    10. Muhammad Ramzan, 2021. "Symmetric Impact Of Exchange Rate Volatility On Foreign Direct Investment In Pakistan: Do The Global Financial Crises And Political Regimes Matter?," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 16(04), pages 1-21, December.
    11. Ebenezer Olamide & Kanayo Ogujiuba & Andrew Maredza, 2022. "Exchange Rate Volatility, Inflation and Economic Growth in Developing Countries: Panel Data Approach for SADC," Economies, MDPI, vol. 10(3), pages 1-19, March.
    12. Lúcio Otávio Seixas Barbosa & Douglas Alencar, 2025. "A Post-Keynesian Framework for Exchange Rate Equilibrium: Simulations for the Brazilian Economy," Review of Political Economy, Taylor & Francis Journals, vol. 37(1), pages 53-71, January.
    13. Rihab Bousnina & Srdjan Redzepagic & Foued Badr Gabsi, 2021. "Sustainability of current account balances in MENA countries: threshold cointegration approach," Economic Change and Restructuring, Springer, vol. 54(1), pages 241-264, February.
    14. Ben Mimoun, Mohamed & Boukhatem, Jamel & Raies, Asma, 2024. "Aggregate demand and inflation response to monetary policy shocks in Tunisia," Journal of Policy Modeling, Elsevier, vol. 46(3), pages 592-612.
    15. Nizar Becheikh, 2021. "Political stability and economic growth in developing economies: lessons from Morocco, Tunisia and Egypt ten years after the Arab Spring," Post-Print hal-03583934, HAL.
    16. Stasys Girdzijauskas & Dalia Streimikiene & Ingrida Griesiene & Asta Mikalauskiene & Grigorios L. Kyriakopoulos, 2022. "New Approach to Inflation Phenomena to Ensure Sustainable Economic Growth," Sustainability, MDPI, vol. 14(1), pages 1-21, January.
    17. Nizar Becheikh, 2021. "Political stability and economic growth in developing economies: lessons from Morocco, Tunisia and Egypt ten years after the Arab Spring," Insights into Regional Development, VsI Entrepreneurship and Sustainability Center, vol. 3(2), pages 229-251, June.
    18. Oleg Itskhoki, 2021. "The Story of the Real Exchange Rate," Annual Review of Economics, Annual Reviews, vol. 13(1), pages 423-455, August.
    19. Guzman, Martin & Ocampo, Jose Antonio & Stiglitz, Joseph E., 2018. "Real exchange rate policies for economic development," World Development, Elsevier, vol. 110(C), pages 51-62.
    20. Collins, Susan M., 1996. "On becoming more flexible: Exchange rate regimes in Latin America and the Caribbean," Journal of Development Economics, Elsevier, vol. 51(1), pages 117-138, October.
    21. Kais Saidi & Lobna Hassen & M. Hammami, 2015. "Econometric Analysis of the Relationship Between ICT and Economic Growth in Tunisia," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 6(4), pages 1191-1206, December.
    22. Ugurlu, Esra Nur & Razmi, Arslan, 2023. "Political economy of real exchange rate levels," Journal of Comparative Economics, Elsevier, vol. 51(3), pages 918-940.
    23. Solow, Robert M., 1999. "Neoclassical growth theory," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 9, pages 637-667, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wenbo Jia & Hao Jiang & Yiqing Lyv & Stavros Sindakis, 2025. "Uncertainty’s Effect on China’s Knowledge-Based Economy: Transformation Beyond Trade," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(1), pages 4684-4725, March.
    2. Cécile Couharde & Carl Grekou & Valérie Mignon & Florian Morvillier, 2024. "Reconciling Contrasting Views on the Growth Effect of Currency Undervaluations," Working Papers 2024-06, CEPII research center.
    3. Yajima, Giuliano Toshiro & Nalin, Lorenzo, 2024. "Technological lock-in developing countries: The role of external financing," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 494-502.
    4. Chen, Shiu-Sheng & Huang, Yao-Ting & Lin, Tzu-Yu, 2025. "Misaligned currencies and economic growth: The role of global value chains," Journal of International Money and Finance, Elsevier, vol. 151(C).
    5. Bakari, Sayef, 2022. "The Impact of Digitalization and Patent on Economic Growth in Romania," MPRA Paper 114259, University Library of Munich, Germany.
    6. Yugang He & Zhuoqi Teng, 2024. "Navigating Uncharted Waters: The Transformation of the Bank of Korea’s Monetary Policy in Response to Global Economic Uncertainty," Mathematics, MDPI, vol. 12(11), pages 1-24, May.
    7. Ghosh, Saibal, 2023. "Social unrest and corporate behaviour during the Arab Spring period," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    8. Salles Andrés Gabriel & Bertholet Nicolás, 2025. "El impacto de las devaluaciones sobre el PIB en América Latina: un análisis para 1993–2004 a partir de Local Projections," Asociación Argentina de Economía Política: Working Papers 4837, Asociación Argentina de Economía Política.
    9. Couharde, Cécile & Grekou, Carl & Mignon, Valérie & Morvillier, Florian, 2025. "Reconciling contrasting views on the growth effect of currency misalignments," Journal of International Money and Finance, Elsevier, vol. 151(C).
    10. Ramos-Herrera, María del Carmen & Sosvilla-Rivero, Simón, 2023. "Economic growth and deviations from the equilibrium exchange rate," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 764-786.
    11. Giuliano Toshiro Yajima & Lorenzo Nalin, 2022. "Financial Barriers to Structural Change in Developing Economies: A Theoretical Framework," Economics Working Paper Archive wp_1004, Levy Economics Institute.
    12. Ugurlu, Esra Nur & Razmi, Arslan, 2023. "Political economy of real exchange rate levels," Journal of Comparative Economics, Elsevier, vol. 51(3), pages 918-940.
    13. Palazzo, Gabriel, 2024. "Real exchange rate and import substitution episodes: Evidence from a developing economy," World Development, Elsevier, vol. 184(C).
    14. Alex Borodin & Galina Panaedova & Svetlana Frumina & Aidyn Kairbekuly & Natalia Shchegolevatykh, 2021. "Modeling the Business Environment of an Energy Holding in the Formation of a Financial Strategy," Energies, MDPI, vol. 14(23), pages 1-18, December.
    15. Firat Demir & Arslan Razmi, 2022. "The Real Exchange Rate And Development Theory, Evidence, Issues And Challenges," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 386-428, April.
    16. Yougbaré, Lassana, 2011. "Exchange rate arrangements and misalignments: contrasting words and deeds," MPRA Paper 32362, University Library of Munich, Germany.
    17. Berg, Andrew & Borensztein, Eduardo & Mauro, Paolo, 2002. "An evaluation of monetary regime options for Latin America," The North American Journal of Economics and Finance, Elsevier, vol. 13(3), pages 213-235, December.
    18. Gianfranco DI VAIO & Michele BATTISTI, 2010. "A Spatially-Filtered Mixture of Beta-Convergence Regression for EU Regions, 1980-2002," Regional and Urban Modeling 284100013, EcoMod.
    19. Sebnem Kalemli-Ozcan & Herman Kamil & Carolina Villegas-Sanchez, 2016. "What Hinders Investment in the Aftermath of Financial Crises: Insolvent Firms or Illiquid Banks?," The Review of Economics and Statistics, MIT Press, vol. 98(4), pages 756-769, October.
    20. Heni Boubaker & Ben Saad Zorgati Mouna, 2024. "Transmission of Inflation and Exchange Rate Effects: The Markov Switching Vector Autoregressive Methodology," JRFM, MDPI, vol. 17(6), pages 1-30, May.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics
    • A10 - General Economics and Teaching - - General Economics - - - General
    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:127389. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.