Real Exchange Rate Behavior and Economic Growth: Evidence from Egypt, Jordan, Morocco, and Tunisia

24 Pages Posted: 12 Feb 2006

See all articles by Ilker Domac

Ilker Domac

World Bank - Poverty Reduction and Economic Management Unit (EASPR)

Ghiath Shabsigh

International Monetary Fund (IMF) - Middle East and Central Asia Department

Date Written: March 1999

Abstract

This paper examines the effect of the real exchange rate misalignment (RERMIS) on the collective economic growth of Egypt, Jordan, Morocco, and Tunisia. The paper constructs three measures of exchange rate misalignment based on purchasing power parity; a black market exchange rate; and a structured model. The empirical investigation confirmed the adverse effect of RERMIS on growth, using all measures of RERMIS, as predicted by endogenous growth models. The results also highlighted the role of other factors; specifically, capital growth and population have the theoretical signs predicted by the Solow growth model and are statistically significant.

Keywords: Real Exchange Rate, Exchange Rate Mislignment, Exchange Rate Policies, Growth, Arab Countries, Egypt

JEL Classification: F31, F41, O11, O53

Suggested Citation

Domac, Ilker and Shabsigh, Ghiath, Real Exchange Rate Behavior and Economic Growth: Evidence from Egypt, Jordan, Morocco, and Tunisia (March 1999). IMF Working Paper No. 99/40, Available at SSRN: https://ssrn.com/abstract=880567

Ilker Domac (Contact Author)

World Bank - Poverty Reduction and Economic Management Unit (EASPR) ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Ghiath Shabsigh

International Monetary Fund (IMF) - Middle East and Central Asia Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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