Equilibrium Real Exchange Rates and Capital Flows in Tunisia
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Abstract
The objective of this paper is to study the impact of the variability (volatility and misalignment) of the real exchange rate (RER) on trade flows over the period 1980-2014.In order to estimate the RER misalignment, we use the methodology of Edwards (1994) which defines the equilibrium RER as a pathway of fundamental variables to ensure internal and external macroeconomic balance. The relation between equilibrium RER and its determiners is obtained by applyingan Error-Correction Model (ECM).Results show that the volatility of the exchange rate causes a decline in exports and imports. The impact of the misalignment is significant only on imports.Keywords: Equilibrium real exchange rate, Misalignment, Cointegration, Export, Import, VECM.JEL Classifications: F14, F62DOI: https://doi.org/10.32479/ijefi.8795Downloads
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Published
2019-11-23
How to Cite
Zouhaier, H., Hniya, S., & Lafi, M. (2019). Equilibrium Real Exchange Rates and Capital Flows in Tunisia. International Journal of Economics and Financial Issues, 9(6), 232–240. Retrieved from https://econjournals.com/index.php/ijefi/article/view/8795
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