Suchergebnisse

This paper deals with an important aspect of Tunisian economic and political
decisions related to the opportunity for currency convertibility. Tunisia
has established its current currency convertibility and has taken steps to
achieve full convertibility of the dinar by gradually removing capital flow
obstacles. Theoretical and empirical literature suggests that capital
account liberalization generally leads to capital inflow in developing
countries, generating an appreciation in the real exchange rate (RER) and
thus a loss in competitiveness. However, preserving competitiveness is a key
challenge for monetary authorities, who have to conciliate these two
apparently conflicting purposes. To guide their decisions with respect to
the prescribed procedure for capital liberalization, we need to evaluate the
impact of each capital component flow on the RER. The question is addressed
by analyzing impulse response functions (IRF) resulting from a VAR model,
covering 1970 to 2010 and gathering the RER, its fundamental determinants,
monetary variables and an estimated capital control (CC) variable. Results
show that a relaxation of CC overappreciates the RER to its long-term level,
and liberalizing portfolio investment is the most compromising for
competitiveness.