Exchange Rate Undervaluation to Foster Manufactured Exports: A Deliberate Strategy?

Patrick Plane (), Ridha Nouira and Khalid Sekkat
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Patrick Plane: Centre d'Etudes et de Recherches sur le Développement International(CERDI)

No 201010, Working Papers from CERDI

Abstract: Recent literature suggests that a proactive strategy consisting of deliberate real exchange rate depreciation can promote exports diversification and growth. This paper is built on these recent developments and investigates whether four developing countries have adopted such a strategy. Data from Egypt, Jordan, Morocco and Tunisia are used to construct and compare the macroeconomic Real Effective exchange rate (REER), similar exchange rates at the sector level (SREER) and the macroeconomic Equilibrium Real Effective exchange rate (EREER). It shows that there are instances where the objective of diversifying exports through depreciation of exchange rate comes at the expense of further misalignment (REER departs from the EREER) and, then, monetary authorities are doomed to choose. The results show that Morocco and Tunisia are choosing the proactive exchange rate strategy while Egypt and Jordan are not. This fits with the observation that the former are doing much better than the latter in terms of exports diversification.

Keywords: Exchange rate; Misalignment; Undervaluation; Exports diversification (search for similar items in EconPapers)
JEL-codes: O14 O24 O53 (search for similar items in EconPapers)
Pages: 39
Date: 2010
New Economics Papers: this item is included in nep-ara and nep-cwa
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Exchange Rate Undervaluation to Foster Manufactured Exports: A Deliberate Strategy? (2011)
Working Paper: Exchange Rate Undervaluation to Foster Manufactured Exports: A Deliberate Strategy? (2011)
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