nep-ara New Economics Papers
on MENA - Middle East and North Africa
Issue of 2015‒07‒18
four papers chosen by
Paul Makdissi
Université d’Ottawa

  1. Labor Market Flexibility and FDI Flows: Evidence from Oil-Rich GCC and Middle Income Countries By Wasseem Mina; Louis Jaeck
  2. Simultaneous Monetary Policies in the Context of the Trilemma: Evidence from the Central Bank of Turkey By Yasin Kursat Onder; Mauricio Villamizar-Villegas
  3. A comparative study of foreign economic policies: the CIVETS countries By Angélica Guerra-Barón; Álvaro Méndez
  4. Forecasting Inflation in Tunisia Using Dynamic Factors Model By AMMOURI, Bilel; TOUMI, Hassen; Zitouna, Habib

  1. By: Wasseem Mina (Department of Economics and Finance, College of Business and Economics, United Arab Emirates University); Louis Jaeck (Department of Economics and Finance, College of Business and Economics, United Arab Emirates University)
    Abstract: In this paper we empirically examine the impact of labor market flexibility on FDI flows to oil-rich GCC and compare it to middle income countries in 2006-2011. We account for potential endogeneity and nonstationarity and adopt system GMM and IV estimation methodologies. Our findings show that in middle income countries overall flexibility increases FDI flows under both system GMM and IV methodologies. In GCC countries overall LMF decreases FDI flows under system GMM methodology. Results also show a positive “GCC region” influence outweighing the negative flexibility influence. Growth potential and infrastructure development matter for both GCC and middle income countries.
    Date: 2015–05–08
  2. By: Yasin Kursat Onder (Central Bank of Turkey); Mauricio Villamizar-Villegas (Banco de la República de Colombia)
    Abstract: Many central banks that have opted for monetary autonomy have also been reluctant to relinquish control over the value of their currencies. As a result, they have operated through both interest rate and foreign exchange interventions. However, in the context of the monetary trilemma, both effects can potentially offset each other. Using daily data from the Central Bank of Turkey during the period of 2002 - 2010, we study the effects of simultaneous policies by first purging the intended monetary decisions from responses to real-time macroeconomic variables, and then determining their impact on economic activity. We find that the Central Bank of Turkey adjusted its policy rate mostly in response to inflation levels relative to both the yearly target and agents’ expectations, and conducted purchases and sales of foreign currency in response to exchange rate behavior. These responses varied depending on whether interventions were pre-announced. We also find that unannounced purchases of foreign currency had a significant effect in reducing exchange rate volatility but appeared to have no effect on exchange rate changes. On the other hand, changes in the policy rate significantly affected inflation but had no discernible effect on output growth. Classification JEL: E43, E52, E58, F31
    Keywords: Central bank intervention, simultaneous policies, monetary shocks, price puzzle, monetary policy trilemma, foreign exchange intervention.
    Date: 2015–07
  3. By: Angélica Guerra-Barón; Álvaro Méndez
    Abstract: Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa (CIVETS) have shaped their foreign economic policies in line with the Washington Consensus and have implemented strategies to attract foreign investment as a possible way out of the current financial crisis. Once multilateral trade rules were agreed under the WTO, these countries revised their domestic trade policies in order to cope with both the organisational principles and the international investment standards promoted by international financial institutions. Despite the fact that transnational economic groups have been focussing their attention on these ‘new investment miracles’ since the coining of the term CIVETS in 2009, the CIVETS governments have shown no interest in coordinating their foreign economic policies on investment issues. In this paper we argue that the emerging economies of CIVETS exemplify a case of unintended foreign economic policy convergence, facilitated by systemic causes. These include their common need to overcome historic processes of adverse economic transition while getting inserted successfully into world trade; as well as domestic variables like the similar ideas of CIVETS policy makers.
    Keywords: foreign economic policies; CIVETS; convergence; emerging economies; foreign direct investment (FDI); negotiating strategies; free trade agreements (FTAs); bilateral investment treaties (BITs)
    JEL: J1 R14 J01
    Date: 2015
  4. By: AMMOURI, Bilel; TOUMI, Hassen; Zitouna, Habib
    Abstract: This work presents a forecasting inflation model using a monthly database. Conventional models for forecasting inflation use a small number of macroeconomic variables. In the context of globalization and dependent economic world, models have to account a large number of information. This model is the goal of recent research in the various industrialized countries as well as developing countries. With Dynamic Factors Model the forecast values are closer to actual inflation than those obtained from conventional models in the short term. In our research we devise the inflation in to “free inflation and administered inflation” and we test the performance of the DFM in different types of inflation namely administered and free inflation. We found that dynamic factors model leads to substantial forecasting improvements over simple benchmark regressions.
    Keywords: Inflation, PCA, VAR, Dynamic Factors Model, Kalman Filter, algorithmic EM, Space-state, forecast.
    JEL: C13 C22 C53 E31
    Date: 2015–07–10

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