CAPITAL ACCOUNT LIBERALIZATION AND EXCHANGE RATE REGIME CHOICE, WHAT SCOPE FOR FLEXIBILITY IN TUNISIA?

ALI Mohamed Sami Ben (benali_med_sami@yahoo.com.)

No wp815, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: Capital account liberalization and exchange rate regime choice, what scope for flexibility in Tunisia? This study evaluates within a game-theoretic framework the exchange rate regime from a welfare perspective. In a tradable-nontradable goods model framework, Tunisia’s exchange rate regime choice is cast in terms of strategic interactions between the monetary authority and domestic enterprises. The monetary authority is assumed to choose an optimal exchange rate regime according to a welfare-related criterion by minimising a loss function defined in terms of external competitiveness and domestic inflation. Simulations outcomes reveal that capital account liberalization in the Tunisian economic context is compatible with a flexible exchange rate regime.

Keywords: Exchange rate regime; Liberalization; Convertibility; Capital Account; Welfare; Tunisia. (search for similar items in EconPapers)
JEL-codes: F31 F32 F37 F47 (search for similar items in EconPapers)
Pages: pages
Date: 2006-03-01
New Economics Papers: this item is included in nep-cba, nep-cmp, nep-fmk, nep-ifn and nep-mon
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