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How Robust is the Connection between Exchange Rate Uncertainty and Tunisia’s Exports?

Bouoiyour, Jamal and Selmi, Refk (2014): How Robust is the Connection between Exchange Rate Uncertainty and Tunisia’s Exports?

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Abstract

This study addresses the robustness of the connection between exchange rate uncertainty and Tunisia’s exports along several econometric methods, acknowledging the complexity of this relationship. To this end, we apply conventional methods (OLS by threshold, instrumental variable by threshold and ARDL Bounds testing approach) and new methods (evolutionary co-spectral analysis and wavelet decomposition). Both methods appear complementary. We find that the exchange rate uncertainty is always more detrimental to exports in the short term or when reaching certain thresholds. These outcomes clearly indicate that Tunisia was headed in the right direction and therefore the continuation of the policies already being pursued seem beneficial, while paying proper attention to short-run disturbances.

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