Sources of real exchange rate movements in Saudi Arabia

Eisa Aleisa and Selahattin Dibooglu

Journal of Economics and Finance, 2002, vol. 26, issue 1, 110 pages

Abstract: The paper investigates the sources of real exchange rate movements in Saudi Arabia by decomposing real exchange rate movements into those attributable to real and nominal shocks. Using a popular structural VAR model and assuming long-run neutrality of nominal shocks, we find that real shocks play a significant role in explaining real exchange rate movements in Saudi Arabia. Using a more disaggregated model, we also find that oil production shocks rather than real oil price shocks are responsible for real exchange rate movements. In order to stabilize the real exchange rate, Saudi Arabia should focus on stabilizing oil production.(JEL F3, C5) Copyright Springer 2002

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:spr:jecfin:v:26:y:2002:i:1:p:101-110

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DOI: 10.1007/BF02744455

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