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

Author/Editor: Fanizza, Domenico ; Laframboise, Nicole ; Martin, E. ; Sab, Randa ; Karpowicz, Izabela
Publication Date: November 01, 2002
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Summary: 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.
Series: Working Paper No. 02/190
Subject(s): Real effective exchange rates | Tunisia | Flexible exchange rates | Exchange rate regimes

Author's Keyword(s): Real exchange rate target
Publication Date: November 01, 2002
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA1902002 Pages: 27
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