Sustainability of exchange rate policies and external public
debt in the Mena region
Simon Neaime
Department of Economics, American University of Beirut, 3
Dag Hammarskjold Plaza, New York, NY 10017, USA. E-mail:
sn01@aub.edu.lb. Tel:
961-3-829944.
Fax: 961-1-742816. E-mail:
sn01@aub.edu.lb.
Accepted 15 May, 2009 |
|
The conduct
of exchange rate and fiscal policies in the small open Mena
economies has recently become critical in determining those
countries future economic and fiscal situation, due to the
accumulation since the early 1990s of a sizable level of
external debt, and the pursuit by some countries of a fixed
exchange rate regime. This study presents thorough empirical
analysis of the sustainability of exchange rate and external
public debt using time series econometric models. The
empirical results point to sustainable fiscal and exchange
rate policies in Tunisia and Morocco, unsustainable external
debt but sustainable exchange rate policies in Egypt and
Turkey, and unsustainable external debt and exchange rate
policies in Jordan. If Jordan still opts for maintaining a
fixed US dollar exchange rate arrangement, it will have to
implement crisis-prevention measures, namely by exercising
fiscal discipline, and managing properly its external debt
and foreign reserves.
Key words:
MENA, exchange rate, foreign debt, sustainability, JEL
classification: C22, E31, H63. |
