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Exchange Rate Regime and Competitiveness of Manufactured Exports: The case of MENA Countries

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  • Marie-Ange VEGANZONES-VAROUDAKIS

    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • NABLI

Abstract

In this paper, we show that MENA countries have been characterized by a significant overvaluation of their currency during the 70s and 80s. For this purpose, we have developed an indicator of misalignment based on the estimation of an equilibrium exchange rate ─ following Edwards (1989) ─ on a panel of 53 countries, among which 10 are MENA economies. Overvaluation has however decreased in the 90s, probably due to the flexibilisation of the exchange rate regime in some MENA countries and to a better macroeconomic management in others. Misalignment remains nevertheless higher than in other regions, which may be explained by the delay of the MENA region in adopting more flexible exchange rates, as well as in reforming their economy. Our study illustrates that overvaluation had a cost for the region in term of competitiveness. This has been done through the estimation of an export equation, which shows that manufactured exports have been affected by the overvaluation of the exchange rate. This finding partly explains the lower diversification of some economies at some period of time and highlights the need for improved management of the exchange rate regime. In fact, countries that had already a more diversified economy, have benefited, specially in the 90s, from the reduction of the overvaluation of their currency.

Suggested Citation

  • Marie-Ange VEGANZONES-VAROUDAKIS & NABLI, 2002. "Exchange Rate Regime and Competitiveness of Manufactured Exports: The case of MENA Countries," Working Papers 200230, CERDI.
    • Handle: RePEc:cdi:wpaper:853
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    2. Sabrine Ferjani & Sami Saafi & Ridha Nouira & Christophe Rault, 2022. "The Impacts of the Dollar-Renminbi Exchange Rate Misalignment on the China-United States Commodity Trade: An Asymmetric Analysis," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(3), pages 507-554, September.
    3. Olimov, Ulugbek & Sirajiddinov, Nishanbay, 2008. "The Effects of the Real Exchange Rate Volatility and Misalignments on Foreign Trade Flows in Uzbekistan," MPRA Paper 9749, University Library of Munich, Germany.
    4. Diallo, Ibrahima Amadou, 2011. "The effects of real exchange rate misalignment and real exchange volatility on exports," MPRA Paper 32387, University Library of Munich, Germany.
    5. Jamal Bouoiyour & Refk Selmi, 2016. "A Synthesis of the Effects of Exchange Rate Volatility on International Trade: A Meta-Regression Analysis," The International Trade Journal, Taylor & Francis Journals, vol. 30(4), pages 263-294, August.
    6. Grand Nathalie & Dropsy Vincent, 2005. "Exchange Rate And Inflation Targeting In Morocco And Tunisia," Macroeconomics 0507018, University Library of Munich, Germany.
    7. Bouoiyour, Jamal & Selmi, Refk, 2014. "How Robust is the Connection between Exchange Rate Uncertainty and Tunisia’s Exports?," MPRA Paper 57505, University Library of Munich, Germany.
    8. Elbadawi, Ibrahim A. & Kaltani, Linda & Schmidt-Hebbel, Klaus, 2007. "Post-conflict aid, real exchange rate adjustment, and catch-up growth," Policy Research Working Paper Series 4187, The World Bank.
    9. Bouoiyour, Jamal & Selmi, Refk, 2015. "A synthesis of the effects of exchange rate uncertainty on international trade via Meta-Regression analysis," MPRA Paper 65737, University Library of Munich, Germany.
    10. Bouoiyour, Jamal & Selmi, Refk, 2014. "How Does Exchange Rate Uncertainty interact with International Trade? A Meta-Analysis Revisited," MPRA Paper 56201, University Library of Munich, Germany.

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