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A Common Monetary Policy For The Maghreb: The Winners and The Losers?

  • Belhadj, ARAM
  • Bouguezzi, WAJDI
  • Jedlane, NABIL

During the Arab banks-summit in Paris last June 2008, the project of monetary integration in the Maghreb (Algeria, Libya, Morocco, Mauritania and Tunisia) was discussed again. Yet, many efforts have been undertaken to reinforce the completion of the regional integration process in this part of the world. These were initiated in 1989 by the creation of the Arab Maghreb Union (AMU) and expanded last years to cover the possibility of establishing the Maghreb monetary union. Our aim in this paper consists in assessing the relevance of such a project for three Maghreb countries: Algeria, Morocco and Tunisia. To do that, we try to simulate an aggregated monetary rule describing a common monetary policy in an open economy. This rule is constructed and compared to national monetary rules already simulated in many other works. Such a construction and comparison allow us to verify if a common monetary policy will be beneficial to all countries or, if on the contrary, it will be beneficial to one country rather than the others. Our results suggest that a common monetary policy will be more beneficial to Algeria than to Morocco or Tunisia. In fact, the common central bank has to grant more weight to activity rather than inflation or exchange rate, a result which often coincides with the national Algerian rule.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29701.

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Date of creation: 30 Mar 2009
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Handle: RePEc:pra:mprapa:29701
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  1. Laurence M. Ball, 1999. "Policy Rules for Open Economies," NBER Chapters, in: Monetary Policy Rules, pages 127-156 National Bureau of Economic Research, Inc.
  2. Joshua Aizenman & Michael Hutchison & Ilan Noy, 2008. "Inflation Targeting and Real Exchange Rates in Emerging Markets," NBER Working Papers 14561, National Bureau of Economic Research, Inc.
  3. Barry Eichengreen & Alan M. Taylor, 2003. "The Monetary Consequences of a Free Trade Area of the Americas," NBER Working Papers 9666, National Bureau of Economic Research, Inc.
  4. M S Mohanty & Marc Klau, 2001. "What determines inflation in emerging market economies?," BIS Papers chapters, in: Bank for International Settlements (ed.), Modelling aspects of the inflation process and the monetary transmission mechanism in emerging market countries, volume 8, pages 1-38 Bank for International Settlements.
  5. Eichengreen, Barry, 2002. "Lessons of the Euro for the Rest of the World," Institute of European Studies, Working Paper Series qt16g425jb, Institute of European Studies, UC Berkeley.
  6. Lane, Philip R., 1997. "Inflation in open economies," Journal of International Economics, Elsevier, vol. 42(3-4), pages 327-347, May.
  7. Ben Hammouda, Hakim & Oulmane, Nassim & Bchir, Hédi & Sadni Jallab, Mustapha, 2006. "The Cost of non-Maghreb: Achieving the Gains from Economic Integration," MPRA Paper 13293, University Library of Munich, Germany.
  8. Jean-Paul Pollin & Alexis Penot, 1999. "Construction d'une règle monétaire pour la "zone euro"," Revue Économique, Programme National Persée, vol. 50(3), pages 535-546.
  9. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  10. Charles Freedman, 1981. "Monetary Aggregates as Targets: Some Theoretical Aspects," NBER Working Papers 0775, National Bureau of Economic Research, Inc.
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