Real exchange rate policy proves success in Tunisia
Tunisia has exhibited a strong economic performance while pursuing a constant real exchange rate rule (CRERR) over the past decade. A newly released International Monetary Fund (IMF) report on Tunisia’s experience with the real exchange rate argues that CRERR worked well in the North African state and there is no evidence of overvaluation of the dinar exchange rate.
The limitations of the 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.
Prudent macroeconomic policies combined with the structural reforms undertaken by the authorities in the last few years have helped Tunisia gain market share in the European Union (EU), particularly in exports of manufactured goods. Access to European markets has helped Tunisia integrate into the world economy, upgrade its industry and widen its export base.
CRERR is a macroeconomic policy that maintains a stable real exchange rate against a basket of currencies weighted according to the country’s main trading partners and competitors. Authorities adjust the nominal exchange rate periodically so as to maintain the real exchange constant. — (menareport.com)
© 2002 Mena Report (www.menareport.com)