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Determinants of Exchange Rate Stability in Sudan (1991-2016)

Author

Listed:
  • Khalid Eltayeb Elfaki

    (Faculty of Commercial Studies, University of Gezira, Wad Medani, Sudan.)

Abstract

Exchange rate is one of the most important indicators of economic growth of a country and its stability has significant impact on international trade. This study aimed to investigate the effects of growth rate of real Gross Domestic Product (GDP), real money supply(M), inflation rate(INF), and trade openness (OP) on exchange rate (EXR) stability in Sudan. For this purpose Autoregressive Distributed Lag Model (ARDL) approach was applied to estimate long run and short run relationship among exchange rate determinants, annual data covering period (1991 -2016) have been analyzed. The results reveal that, there is a long run relationships between exchange rate and its determinants and statistically significant. An increase in growth rate of real GDP leads to stability in EXR. The Coefficient of Error Correction model reveals that exchange rate (EXR) will restore back to its equilibrium with speed of adjustment of 23.2% whenever there is a shock to its equilibrium.

Suggested Citation

  • Khalid Eltayeb Elfaki, 2018. "Determinants of Exchange Rate Stability in Sudan (1991-2016)," International Journal of Economics and Financial Issues, Econjournals, vol. 8(2), pages 33-39.
    • Handle: RePEc:eco:journ1:2018-02-5
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    References listed on IDEAS

    as
    1. Kiguel, Miguel & O'Connell, Stephen A, 1995. "Parallel Exchange Rates in Developing Countries," The World Bank Research Observer, World Bank, vol. 10(1), pages 21-52, February.
    2. Lee, Chin & Law, Chee-Hong, 2013. "The Effects of Trade Openness on Malaysian Exchange Rate," MPRA Paper 45185, University Library of Munich, Germany.
    3. Aasim M. Husain & Ashoka Mody & Kenneth S. Rogoff, 2004. "Exchange Rate Regime Durability and Performance in Developing Countries Versus Advanced Economies," NBER Working Papers 10673, National Bureau of Economic Research, Inc.
    4. Elbadawi, Ibrahim A, 1994. "The Expatriate Workers' Remittances, Parallel Foreign Exchange Market and Macroeconomic Performance in Sudan," Journal of African Economies, Centre for the Study of African Economies, vol. 3(3), pages 481-512, December.
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    More about this item

    Keywords

    Exchange Rate; ARDL; Trade Openness.;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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