Tunisia’s Experience with Real Exchange Rate Targeting and the Transition to a Flexible Exchange Rate Regime

International Monetary Fund

No 2002/190, IMF Working Papers from International Monetary Fund

Abstract: Over the past decade or so, Tunisia has experienced a strong economic performance while pursuing a constant real exchange rate rule (CRERR). The limitations of this rule are now beginning to emerge in the context of a more open economy, regional integration, a more market-based monetary policy, and the desire to relax capital controls. This paper explores how Tunisia avoided the pitfalls of real exchange rate targeting as predicted by the theoretical models. By estimating the equilibrium real exchange rate based on fundamental variables and assessing different measures of competitiveness, the paper finds no evidence of a misalignment in the current level of the exchange rate.

Keywords: WP; exchange rate; Tunisia; price; rate depreciation; Real exchange rate target; rate of exchange; GDP deflator; excess demand; traded goods; Real exchange rates; Exchange rates; Real effective exchange rates; Inflation; Exchange rate arrangements; Middle East; North Africa; Global (search for similar items in EconPapers)
Pages: 27
Date: 2002-11-01
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Citations: View citations in EconPapers (11)

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