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

28 Pages Posted: 6 Feb 2006

See all articles by Domenico Fanizza

Domenico Fanizza

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

N. Laframboise

International Monetary Fund (IMF)

E. Martin

International Monetary Fund (IMF)

Randa Sab

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

Izabela Karpowicz

International Monetary Fund (IMF)

Date Written: November 2002

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: Real exchange rate target

JEL Classification: F31, F32

Suggested Citation

Fanizza, Domenico and Laframboise, N. and Martin, E. and Sab, Randa and Karpowicz, Izabela, Tunisia's Experience with Real Exchange Rate Targeting and the Transition to a Flexible Exchange Rate Regime (November 2002). IMF Working Paper No. 02/190, Available at SSRN: https://ssrn.com/abstract=880295

Domenico Fanizza (Contact Author)

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

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

N. Laframboise

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

E. Martin

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Randa Sab

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

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

Izabela Karpowicz

International Monetary Fund (IMF) ( email )

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

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