The Impact of Full Convertibility of the Dinar on the Macro-Economic Situation in Tunisia

Document Type: Research Paper

Authors

1 Faculty of Economic Sciences and Management of Sousse, University of Sousse, Tunisia

2 Higher Institute of Management of Sousse, University of Sousse, Tunisia

Abstract

Convertibility is an important factor in international trade where instruments valued in different currencies will be exchanged. Convertibility can be either total manner or a partial manner. However, whatever the type of convertibility, there will be advantages and disadvantages to  the economy of a country of which has  made a convertibility of its national currency. Convertibility was studied by means of the causal relationship between the exchange rate and the level of domestic inflation. Our research is devoted to the study of the impact of full convertibility on the macro economic situation in Tunisia. In this study  a VAR model is used  to test the dynamic relationship between the nominal effective exchange rate and the inflation rate. The present study is based on monthly data for a period of 13 years (2000-2012). Three endogenous variables and three exogenous variables are used. The results indicated that  the existence of a bidirectional relationship between the nominal effective exchange rate and the inflation rate. This relationship reflects the impact of the convertibility of the Dinar on the macro-economic situation in Tunisia.

Keywords


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