The main purposes of this article are 3-fold. First, we construct measures of real and nominal effective exchange rates for 14 Middle East and North African countries over the 1970-2004 period. Second, we test the validity of the Purchasing Power Parity (PPP) by applying the ADF and KPSS tests to the real effective exchange rates. Finally, we employ the bounds testing approach to cointegration and error-correction modelling to show that nominal devaluation leads to real devaluation in the short-run as well as in the long-run in many of the countries.
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Document Type: Research Article
Department of Economics, Center for Research on International Economics, University of Wisconsin-Milwaukee, Milwaukee, WI 53201, USA
International Monetary Fund, Washington, DC 20431, USA
Publication date: 01 October 2007
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