The Interaction between Exchange Rate Regime and Economic Growth : Empirical Evidence for Tunisia

This paper revisits, empirically, the question of whether the choice of exchange rate regime (floating currency, fixed rate or intermediate arrangement) has a direct effect on the long-term growth in Tunisia over a period from 1990 to 2014. The results show that both series are integrated of order one (I(1)), the existence of a long-term relationship between exchange rate regime and economic growth and Granger pairwise causality test revealed unidirectional causality from real GDP to exchange rate regime (RC_t). Our results indicate the absence of any robust relation between the choice of exchange rate regime and economic growth. The policy implication of these findings is clear. The choice of exchange rate policy has no direct impact on the long-term growth of Tunisian economy