Monetary Flexibility, Exchange Rate Regimes

Abstract

This study examines the impact of exchange rate regimes on economic growth in selected MENA countries from 1980 to 2023 using panel data and a Panel VAR framework. Employing unit root tests, Pedroni cointegration, Granger causality, variance decomposition, and impulse response functions, it finds no long-run cointegration between regimes and growth. However, short-term dynamics reveal that fixed regimes rely heavily on exports and GDP, while intermediate regimes display more self-contained stability. The results highlight that no single regime is optimal, emphasizing the need for context-specific exchange rate strategies tailored to each country’s structural and macroeconomic conditions.