Capital account liberalization and exchange regime choice : what is the scope of flexibility for Tunisia ?

Abstract EN

The structural reforms that has been adopted by Tunisia for its economy since 1986, have allowed the establishment of the convertibility of its current account in January 1993.

The capital account liberalization remains a top priority in the immediate future.

In this respect, the exchange regime that will be Tunisia’s choice is vital.

This study evaluates the exchange rate regime from a welfare perspective within a game-theoretic framework.

In a tradable/non-tradable goods model framework, Tunisia’s exchange rate regime choice is cast in terms of external competitiveness and domestic inflation.

Based on the Tunisian economic parameters, the simulation outcomes reveal that capital account liberalization is compatible with a flexible exchange regime.

Simulation exercises also show that such a regime leaves the authorities a margin of manoeuvre to correct the balance of payment disequilibrium and to promote a policy of economic growth by exportations.