scholarly journals Real exchange of rate of balance and misalignments: Lesson from the model VAR-ECM in the case of Tunisia

2008 ◽  
Vol 55 (4) ◽  
pp. 439-464
Author(s):  
Marrakchi Charfi
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Open Economy ◽  
Capital Controls ◽  
Capital Inflows ◽  
Real Effective Exchange Rate ◽  
The Us ◽  
Effective Exchange ◽  
In The Beginning ◽  
Effective Exchange Rate

Tunisia has experienced a performance when pursuing a constant real exchange rate rule. The limitations of this rule are beginning to emerge in the context of a more open economy, which desire to relax capital controls. This paper estimates the equilibrium real exchange rate of the dinar vis ? vis the euro and the $US from 1983 to 2000, using quarterly data, based on the following fundamental variables: terms of trade, net capital inflows and the differential of productivity. Results show that Tunisian dinar was overvalued before the 1986 devaluation, becomes close to its equilibrium value over the 90s'. In the beginning of this century (2000), authorities permit a larger fluctuation of the real effective exchange rate. .

scholarly journals Real exchange rate behaviour and economic growth: evidence from Sierra Leone

2011 ◽  
Vol 13 (1) ◽  
pp. 8-25 ◽  
Author(s):  
Abu Tarawalie
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Sierra Leone ◽  
Real Effective Exchange Rate ◽  
Causality Test ◽  
The Real ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Impact

The main focus of this paper is to examine the impact of the real effective exchange rate on economic growth in Sierra Leone. First an analytical framework is developed to identify the determinants of the real effective exchange rate. Using quarterly data and employing recent econometric techniques, the relationship between the real effective exchange rate and economic growth is then investigated. A bivariate Granger causality test was also employed as part of the methodology to examine the causal relationship between the real exchange rate and economic growth. The empirical results suggest that the real effective exchange rate correlates positively with economic growth, with a statistically significant coefficient. The results also indicate that monetary policy is relatively more effective than fiscal policy in the long run, and evidence of the real effective exchange rate causing economic growth was profound. In addition, the results showed that terms of trade, exchange rate devaluation, investment to GDP ratio and an excessive supply of domestic credit were the main determinants of the real exchange rate in Sierra Leone.

scholarly journals Real Effective Exchange Rate Misalignment of the Tunisian dinar

2021 ◽  
Author(s):  
Bouzid Amaira
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Structural Adjustment ◽  
Financial Integration ◽  
Real Effective Exchange Rate ◽  
Equilibrium Exchange Rate ◽  
The Real ◽  
Effective Exchange ◽  
Trade And Exchange ◽  
Effective Exchange Rate

In the Tunisian context, the issue of the misalignment of the real exchange rate has arisen for some time for some reason, a question that has intensified after the adoption of the floating regime. In this article, we will look at the assessment of the effects, if any, of the misalignment of the real effective exchange rate (REER) to its equilibrium value over the period from 1986 to 2015. The results show that the equilibrium level of the long-run exchange rate depends on productivity, the terms of trade and government spending. Two sub-periods are noted, that of a positive mismatch (undervaluation) from 1986 to 2003 followed by another negative mismatch (overvaluation) from 2004 to 2015. Such a result can be explained by the orientation of Tunisia towards the flexibility of the real exchange rate which in turn is likely to reduce the degree of imbalance of the real exchange rate. Similarly, the Tunisian authorities must adopt gradual reforms in their decisions on liberalization and financial integration and they are called upon to strengthen their trade and exchange policies to meet the challenge of the new international financial architecture. Finally, concerning the misalignment, we found the difference between the observed exchange rate and the equilibrium exchange rate is very low, especially since the implementation of the structural adjustment plan.

External shocks and output composition: evidence from Nigeria

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Titus Ayobami Ojeyinka ◽  
Dauda Olalekan Yinusa
Keyword(s):  
Exchange Rate ◽  
Open Economy ◽  
Real Effective Exchange Rate ◽  
External Shocks ◽  
Content Type ◽  
Trading Partners ◽  
Effective Exchange ◽  
Exchange Rate Shocks ◽  
Effective Exchange Rate ◽  
The Impact

PurposeThe study investigates the impact of external shocks on output composition (consumption and investment) in Nigeria for the period 1981:Q1– 2018:Q4. Trade-weighted variables from the country's five major trading partners are constructed to capture the impact.Design/methodology/approachThe study employs a block exogeneity open economy structural vector autoregressive (SVAR) analysis in studying the stated relationship.FindingsThe study reveals that external shocks significantly affect consumption and investment in Nigeria. Results from the structural impulse response function suggest that foreign output, real effective exchange rate and foreign interest rate have significant negative effects on consumption and investment. Specifically, results from error variance decomposition show that foreign inflation and real effective exchange rate shocks are major drivers of fluctuations in consumption and investment in Nigeria. Interestingly, the study finds that oil price shock accounts for minor variations in consumption and investment in Nigeria.Research limitations/implicationsThe findings suggest that consumption and investment in Nigeria are substantially and largely driven by external shocks.Practical implicationsThere is need for the monetary authority and the Nigerian government to design appropriate policies to stabilise the naira and salvage the country's exchange rate from unexpected large swings so as to reduce the vulnerability of the economy to external shocks.Originality/valuePrevious studies on external shocks have concentrated on the impact of external shocks on aggregate variables such as output and inflation, while few studies on external shocks in Nigeria capture external shocks through single-country data. This study differs from previous similar studies in Nigeria in two ways. First, the study examines the impact of external shocks on output composition such as consumption and investment. Second, the study captures the impact of external shocks on the two components of gross domestic product (GDP) by constructing trade-weighted variables from Nigeria's five major trading partners.

scholarly journals TTESTING ABSOLUTE PPP HYPOTHESIS FOR TWENTY COUNTRIES THROUGH THE SKELETON FROM A SETAR MODEL: SOME NEW EVIDENCE

2018 ◽  
Vol 36 (71) ◽  
Author(s):  
André De Mattos Marques ◽  
Erik Alencar de Figueiredo
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Regime Switching ◽  
Real Effective Exchange Rate ◽  
Threshold Autoregressive ◽  
Nonlinear Approach ◽  
Long Run ◽  
Highly Nonlinear ◽  
Effective Exchange ◽  
Effective Exchange Rate

In this study, the long run PPP hypothesis was tested considering real effective exchange rate dataset for twenty countries provided by the International Monetary Fund (IMF). By focusing on a nonlinear approach, the study tests IMF monthly dataset for specific nonlinearity. Additionally, the study presents a method to estimate the value that real exchange rate may converge in the long run. Linear and nonlinear cases were distinguished by the Hansen’s test. The Self-Exciting Threshold Autoregressive (Setar) model was applied to estimate potential thresholds to indicate the states turning points of the countries competitiveness. Results suggest that real exchange rate for thirteen countries are highly nonlinear and subjected to regime switching. The asymptotic stability analysis guarantees the data stationarity behavior. Absolute PPP hypothesis was supported in five out of thirteen cases. In these few cases the real exchange rate converges to a stable equilibrium not far from the value predicted by the PPP hypothesis.

scholarly journals Searching for long-range dependence in real effective exchange rate: towards parity?

2015 ◽  
Vol 45 (4) ◽  
pp. 821-857 ◽  
Author(s):  
André M. Marques ◽  
Fábio Pesavento
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Purchasing Power Parity ◽  
Mean Squared Error ◽  
Exchange Rate Regime ◽  
Real Effective Exchange Rate ◽  
Power Parity ◽  
The Real ◽  
Effective Exchange ◽  
Effective Exchange Rate

Abstract After the widespread adoption of flexible exchange rate regime since 1973 the volatility of the exchange rate has increased, as a consequence of greater trade openness and financial integration. As a result, it has become difficult to find evidence of the purchasing power parity hypothesis (PPP). This study investigates the possibility of a fall in the persistence of the real exchange rate as a consequence of the financial and commercial integration by employing monthly real effective exchange rate dataset provided by the International Monetary Fund (IMF). Beginning with an exploratory data analysis in the frequency domain, the fractional coefficient d was estimated employing the bias-reduced estimator on a sample of 20 countries over the period ranging from 1975 to 2011. As the main novelty, this study applies a bias-reduced log-periodogram regression estimator instead of the traditional method proposed by GPH which eliminates the first and higher orders biases by a data-dependent plug-in method for selecting the number of frequencies to minimize asymptotic mean-squared error (MSE). Additionally, this study also estimates a moving window of fifteen years to observe the path of the fractional coefficient in each country. No evidence was found of a statistically significant change in the persistence of the real exchange rate.

scholarly journals Pakistan’s External Trade: Does Exchange Rate Misalignment Matter for Pakistan?

2007 ◽  
Vol 12 (Special Edition) ◽  
Author(s):  
M. Ashraf Janjua
Keyword(s):  
Exchange Rate ◽  
Trade Openness ◽  
Capital Inflows ◽  
Real Effective Exchange Rate ◽  
Annual Data ◽  
External Trade ◽  
Effective Exchange ◽  
Exchange Rate Misalignment ◽  
Relative Productivity ◽  
Effective Exchange Rate

This paper is primarily aimed at assessing the significance of the exchange rate on Pakistan’s foreign trade. It estimates the Equilibrium Real Effective Exchange Rate (ERER) and exchange rate misalignment for Pakistan using annual data from FY78 to FY06. The Engle Granger cointegration technique is used for the estimation of ERER depending upon various macroeconomic fundamentals as recommended by Edwards (1994). The results of the study are also used for the forecasting of ERER and misalignment up to the year 2010. The results of the study reveal that ERER is determined by variables such as: a) terms of trade, b) trade openness, c) net capital inflows, d) relative productivity differential, e) government consumption, and f) workers’ remittances.

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