Impact of exchange rate regime on growth: case of the MENA region

Abstract

Theoretical evidence concerning the impact of fixed exchange rate regimes on growth is still mixed and the view that flexible regimes are better suited to insulate the economy against real shocks are still not convincing. Our paper revisits empirically the impact of fixed exchange rate regime (undervalued and overvalued) on the growth performance in the MENA region. Our model studies the performance of 21 countries in the MENA region for a period of 20 years .We will use co-integration and causality to determine the impact on the fixed regime in our model. Our results indicate the absence of any robust relationship between fixed regime (overvalued or undervalued) on the macroeconomic performance and growth in this part of the world.