The Journal of Economic Studies and Policies

The Journal of Economic Studies and Policies

The Monetary Approach to Exchange Rate: Case Study in MENA Countries

Document Type : Original Article

Authors
Hossein Asgharpur 1
Ali Rezazadeh 2
Majid Feshari 3
1 Assistant Professor of Economics, Tabriz University
2 Master student of Economics, University of Tabriz
3 Master of Economic Development and Planning, University of Tabriz
Abstract
The monetary approach happens to be one of the oldest approaches to determine the exchange rate changes. This paper investigates the monetary variables effects on nominal exchange rate in Middle East and North African Countries (MENA). For this purpose, panel data econometrics technique  has applied during 1975-2005 period .
 The empirical results indicate that the monetary model is able to convincingly explain the exchange rates behavior in MENA Countries. In fact, empirical evidence implies that there is a significant relationship between nominal exchange rate and monetary variables such as liquidity differential, output differential, real interest rate differential in Middle East and North African countries.
Hence, by decreasing the real interest rate and liquidity growth and increasing economic growth, the policy makers can improve the exchange rates in these countries, particularly in Iran.
Keywords
Exchange Rate
Monetary Approach
Panel Data
MENA

منابع

1-       شاکری، عباس، اقتصاد کلان، نظریه‌ها و سیاست‌ها، نشر پارس نویسا، تهران، 1387.
2-       Barnett, W. A, Exchange Rate Determination from Monetary Fundamentals: an Aggregation Theoretic Approach, Journal of Forthcoming in Frontiers in Finance and Economics, 2005, pp. 1-24.
3-       Bauer, C , Herz, B., Credibility of CIS exchange rates policies- a technical traders view, Emerging Markets Review, 2007, No. 8, pp. 50-66.
4-       Dibooglu , S , Kutan, A., Sources of real and nominal exchange rate fluctuations in transition economies: the case of Poland & Hungary, Journal of comparative economics, 2001, No. 29, pp. 257-275.
5-       Enders, W , Lee, B., Accounting for real and nominal exchange rate movements in the post-Bretton Woods period, Journal of International Money and Finance, 1997, No. 16, pp. 223-254.
6-       Frenkel, J. A, A monetary approach to exchange rate: doctrinal aspects and empirical evidence, Scandinavian Journal of economics, 1976, No. 78, pp. 200-224.
7-       Greene,William H, Econometrics Analysis, second edition, New York, MacMillian, 1993.
8-       Groen, J. J. J, long horizon predictability of exchange rates: is it for real?, Empirical Economics, 1999, No. 24, pp. 451-469.
9-       Honing, A, Fear of floating and domestic liability dollarization, Emerging Markets Review, 2005, No. 6, pp. 289-307.
10-    Ketenci , N. , Uz , I, Panel analysis of the monetary approach to exchange rates: Evidence from ten new EU members and Turkey , Emerging Markets Review, 2008, No. 9, pp. 57-69.
11-    Mark , N. C, Exchange rates and fundamentals: Evidence on long- horizon predictability, American economic review, 1995, No. 85,pp. 201-218.
12-    Mark, N. C. , Sul, D, Nominal exchange rates and monetary fundamentals: Evidence from a small post- Bretton Woods panel, Journal of International Economics, 2001, No. 53,pp. 29-52.
13-    Mankiw, N. gregory, Macroeconomics, fifth edition, worth publisher, 2003
14-    Meese, R. A. , Rogoff, K , Empirical exchange rate model of the seventies: do they fit out of sample?, Journal of International Economics, 1983, No.  14, pp.3-24.
15-    Nandwa, B. , Ramesh, M , A Monetary Approach to Exchange Rate Dynamics in Low-Income Countries: Evidence from Kenya, Munich Personal RePEc Archive, 2007, No. 5581, PP. 1-21.
16-    Suppel, R , Economic dynamics in EU accession countries: a case for exchange rate flexibility, Mimeo European Central Bank, Frankfurt, 2003.
17-    Wohar, M. E. , Rapach, D. E , Testing the monetary model of exchange rate determination: a closer look at panels, Journal of International Economics, 2002, No. 58, pp. 359-385.
18-    Zettelmeyer, J , The Impact of Monetary Policy on the Bilateral exchange rate: Chile Versus United states, IMF Working Paper, 2003, pp. 1-22.
 
 
Send comment about this article
Enter Name.
Enter a valid email address.
Enter a vaid affiliation.
Enter comments (At leaset 10 words)
CAPTCHA Image
Enter Security Code Correctly.