ERF 27th Annual Conference
Civil Conflicts and Exchange Rate Misalignment: Evidence from MENA and Arab League Members
No.
ERF27_5
Publisher
ERF
Date
May, 2021
Topic
E3. Prices, Business Fluctuations, and Cycles
F4. Macroeconomic Aspects of International Trade and Finance
C2. Single Equation Models
D7. Analysis of Collective Decision-Making
F3. International Finance
For more than a decade, civil conflicts intensity has been high in the Middle East and North Africa, yet the monetary and financial impacts of such episodes have received relatively little attention. Using macroeconomic and conflict panel data for Arab League members, Iran and Turkey during the period 1970–2018, this paper constructs a country-specific real exchange rate misalignment index and adopts an instrumental variable approach to show that civil conflicts lead to real exchange rate overvaluations in the region. Economic policy during post-conflict transitions should be elaborated based on a strategy to realign the currency in order to prevent further macroeconomic imbalances and foster social stability, economic growth and long-term development.
Authors
Thibault Lemaire
PhD Candidate in Economics, Université Paris 1...