Real Exchange Rate Behavior and Economic Growth: Evidence from Egypt, Jordan, Morocco, and Tunisia

March 1, 1999

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the effect of the real exchange rate misalignment (RERMIS) on the collective economic growth of Egypt, Jordan, Morocco, and Tunisia. The paper constructs three measures of exchange rate misalignment based on purchasing power parity; a black market exchange rate; and a structured model. The empirical investigation confirmed the adverse effect of RERMIS on growth, using all measures of RERMIS, as predicted by endogenous growth models. The results also highlighted the role of other factors; specifically, capital growth and population have the theoretical signs predicted by the Solow growth model and are statistically significant.

Subject: Currency markets, Exchange rate policy, Exchange rates, Financial markets, Foreign exchange, Real exchange rates

Keywords: Arab Countries, black market exchange rate premium, Currency markets, East Asia, economic growth, Egypt, equilibrium RER, exchange rate, Exchange Rate Mislignment, Exchange Rate Policies, Exchange rate policy, Exchange rates, Growth, import exchange rate, Moroccan dirham, Real Exchange Rate, Real exchange rates, RER appreciation, RER behavior, RER determination, RER distortion, RER equation, RER level, RER misalignment, RER variability, substitution effect, terms of trade, WP

Pages:
24
Volume:
1999
DOI:
https://doi.org/10.5089/9781451845952.001
Issue:
040
Series:
Working Paper No. 1999/040
Stock No:
WPIEA0401999
ISBN:
9781451845952
ISSN:
1018-5941

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