Exchange Rate Behaviour in an Oil-Dependent Economy: The Experience of the Sudanese Dinar

Marial A. Yol
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Marial A. Yol: Department of Economics, University of Juba, Sudan & Department of Economics, Universiti Putra Malaysia, Malaysia.

Indian Economic Review, 2009, vol. 44, issue 1, 69-88

Abstract: The objective of this paper is to estimate the extent of exchange rate misalignment in the Sudan over period 1970-2005. The bounds test finds two cointegrating relations when nominal and world price index are the dependent variables. The long-run coefficients indicate that nominal exchange rates were jointly determined by the world and domestic prices. The significant error-correction term implies that approximately 65% of total disequilibrium in nominal exchange rate was being corrected in each year in Sudan. The evidence strongly indicates that oil perpetuated the recent dinar appreciation thought to be responsible for poor performance of traditional non-oil exports.

Keywords: PPP hypothesis; Bounds Test; Exchange Rate Misalignment; Dutch Disease; Sudan (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
Date: 2009
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