Tunisia’s Experience with Real Exchange Rate Targeting and the Transition to a Flexible Exchange Rate Regime
November 1, 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.
Subject: Exchange rate arrangements, Exchange rates, Foreign exchange, Inflation, Prices, Real effective exchange rates, Real exchange rates
Keywords: excess demand, exchange rate, Exchange rate arrangements, Exchange rates, GDP deflator, Global, Inflation, Middle East, North Africa, price, rate depreciation, rate of exchange, Real effective exchange rates, Real exchange rate target, Real exchange rates, traded goods, Tunisia, WP
Pages:
27
Volume:
2002
DOI:
Issue:
190
Series:
Working Paper No. 2002/190
Stock No:
WPIEA1902002
ISBN:
9781451859676
ISSN:
1018-5941
