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How Does Exchange Rate Policy Affect Manufactured Exports in the MENA countries

Author

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  • Marie-Ange Véganzonès-Varoudakis

    (CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)

  • M.K. Nabli
Abstract
This paper shows that, during the 1970s and 1980s, MENA economies were characterized by a significant overvaluation of their currency. This overvaluation has had a cost in terms of competitiveness. To determine the degree of overvaluation of the MENA currencies, an indicator of misalignment was developed based on the estimation of an equilibrium exchange rate (Edwards, Exchange Rate Misalignment in Developing Countries, The Johns Hopkins University Press, Baltimore, 1988). The empirical work was based on a panel of 53 developing countries, ten of which are MENA economies. Although overvaluation decreased in the 1990s, probably due to flexibilization of the exchange rate regime in some MENA countries and to better macroeconomic management in others, misalignment remained higher than in other regions. This may be explained by the MENA countries' delay in adopting more flexible exchange rates, as well as in reforming their economies. In terms of competitiveness, the estimation of an export equation has shown that manufactured exports have been significantly affected by the overvaluation of the MENA currencies. Countries that already had a more diversified economy benefited more from the decreased overvaluation in the 1990s. These countries also saw a continuous rise in diversification of their manufactured exports, resulting from the significant decline in exchange rate misalignment.
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Suggested Citation

  • Marie-Ange Véganzonès-Varoudakis & M.K. Nabli, 2007. "How Does Exchange Rate Policy Affect Manufactured Exports in the MENA countries," Post-Print hal-00204789, HAL.
    • Handle: RePEc:hal:journl:hal-00204789
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    Cited by:

    1. Kinda, Tidiane & Plane, Patrick & Veganzones-Varoudakis, Marie-Ange, 2009. "Firms'productive performance and the investment climate in developing economies : an application to MENA manufacturing," Policy Research Working Paper Series 4869, The World Bank.
    2. Tidiane Kinda & Patrick Plane & Marie‐Ange Véganzonès‐Varoudakis, 2011. "Firm Productivity And Investment Climate In Developing Countries: How Does Middle East And North Africa Manufacturing Perform?," The Developing Economies, Institute of Developing Economies, vol. 49(4), pages 429-462, December.
    3. Nidal Rashid Sabri & Marga Peeters & Diama K. Abulaban, 2012. "The impact of exchange rate volatility on trade integration among North and South Mediterranean countries," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 9(2), pages 107-121.
    4. Brixiova Zuzana & Egert Balazs & Essid Thouraya Hadj Amor, 2014. "The Real Exchange Rate and External Competitiveness in Egypt, Morocco and Tunisia," Review of Middle East Economics and Finance, De Gruyter, vol. 10(1), pages 25-51, April.
    5. Nassif, Claudia & Walkenhorst, Peter, 2006. "Trade, competitiveness and employment in Jordan," MPRA Paper 23979, University Library of Munich, Germany.
    6. Obiyathulla Ismath Bacha, 2008. "A common currency area for MENA countries? A VAR analysis of viability," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 3(2), pages 197-215, April.
    7. Umar Aliyu Shuabiu & Mohammed A. M. Usman & Behiye Çavuşoğlu, 2021. "The Nexus among Competitively Valued Exchange Rates, Price Level, and Growth Performance in the Turkish Economy; New Insight from the Global Value Chains," JRFM, MDPI, vol. 14(11), pages 1-19, November.
    8. Zuzana Brixiova & Balázs Égert & Thouraya Hadj Amor Essid, 2013. "Working Paper 187 - The Real Exchange Rate and External Competitiveness in Egypt, Morocco and Tunisia," Working Paper Series 991, African Development Bank.

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