Title: The impacts of productivity differentials and oil price on the real exchange rate misalignment: evidence from a developing country

Authors: Mouyad Alsamara

Addresses: Department of Finance and Economics, College of Business and Economics, Qatar University, P.O. Box 2713, Doha, Qatar

Abstract: This study examines the impact of oil price and productivity differentials on real exchange rate (RER) misalignment in Syria from 1980 to 2010. In order to do that, this research develops an index for productivity differential by applying the Autoregressive Distributed Lag (ARDL) bounds test for cointegration proposed by Pesaran et al. (2001). The empirical results found that there is a positive and significant relationship between productivity differentials, oil price, gross capital formation and RER appreciation while government expenditure has an opposite impact. Stability tests show that RER adjusts towards its equilibrium path. The empirical results further conclude that a flexible exchange rate raise the adjustment speed towards the equilibrium in the long run. Consequently, Syria's monetary policy economy should achieve a flexible exchange rate regime to ease the convergence of the exchange rate after a shock occurs.

Keywords: real exchange rate misalignment; Syrian economy; ARDL model and productivity differentials.

DOI: 10.1504/JGBA.2019.103313

Journal for Global Business Advancement, 2019 Vol.12 No.4, pp.582 - 599

Accepted: 01 Nov 2018
Published online: 23 Oct 2019 *

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