Review of Development Economics · 2003 · 50 citations · 13 references
Social SciencesEconomicsInternational EconomicsInternational TradeMacroeconomicsExchange Rate DeterminationExchange Rate PolicyExchange Rate RegimesExchange RatesForeign Exchange MarketsMonetary PolicyEuro Area EconomicsReal Effective Exchange RateReal Exchange Rate DynamicsReal Exchange Rate Fluctuations
Abstract The paper investigates future exchange rate policy of the Middle East and North African (MENA) countries vis‐à‐vis the euro aimed at fostering their manufactured exports towards Euroland. The exchange rate policy is captured through three different indicators: the real effective exchange rate changes, volatility, and misalignment. The investigation is conducted for 11 sectors over the period 1970–1997. The sample includes four North African countries (Algeria, Morocco, Tunisia, Egypt) and Turkey. The results show that exchange rate management plays a crucial role in providing incentives for manufactured exports toward Euroland. The food sector is weakly responsive to real exchange rate changes while the textile sector is highly responsive. Four growing sectors (electronic, electrical, mechanical, and vehicles) were also found to be highly sensitive to exchange rate changes. The results suggest that policymakers should be more concerned with misalignment than with volatility.
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