Capital Mobility and the Optimal Monetary Policy Rule: A Tunisian Case Study

Mahmoud Nabi and Ndiamé Diop

Chapter 4 in Inflation Targeting in MENA Countries, 2011, pp 72-99 from Palgrave Macmillan

Abstract: Abstract Capital account liberalisation is likely to boost growth through a range of direct and indirect channels: 1) an increase in foreign direct investment (FDI) flows, which may generate learning-by-doing effects, technology transfers and positive effects on domestic investment (see Edison et al., 2004, for an analysis of the relationship between FDI and growth); 2) a greater scope for local firms’ internationalisation; 3) the development of the stock market (Quinn and Toyoda, 2006); 4) the entry of foreign banks, which may lead to greater competition in the domestic financial sector. Nearly all studies based on macro or sector-level data find that financial development, measured by the size of financial intermediation or of external finance relative to GDP, has a significant positive impact on growth, either directly, by raising factor productivity, or indirectly, by stimulating the accumulation of physical and knowledge capital (Pelgrin et al., 2002; Rousseau and Vuthipadadorn, 2005).

Keywords: Exchange Rate; Foreign Direct Investment; Monetary Policy; Central Bank; Real Exchange Rate (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1057/9780230316560_4

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