TITLE:
Modelling the Equilibrium Real Exchange Rate: Evidence from Oil-Exporting Country
AUTHORS:
Abobaker AL.AL. Hadood, Ridha Ali Mohamed Ben Saleh
KEYWORDS:
Modelling, Equilibrium Real Exchange Rate, Misalignment, Libyan, ARDL Model
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.11 No.3,
September
30,
2022
ABSTRACT: This study aims to specify the best model to estimate
the real equilibrium exchange rate of the Libyan dinner during the period
1985-2020 utilizing ARDL model. The results of this study indicate that the
best model explains the determinants of the actual exchange rate (ARE) and
predicts the equilibrium real exchange rate (ERER) is the one that consists of oil revenues (OR), terms of trade (TOT), ration of bored money supply to gross domestic product (M2/GDP), ratio of
domestic inflation to forging inflation (DINF/FINF) and DUMMY. They also point
out that OR is the domino force as it drives the exchange rate of the Libyan
dollar against the US dollar. The results also reveal that the misalignment
between the AER and the ERER had notably increased since the 2002 devaluation.
This study provides valuable information for monetary policy makers by
establishing a benchmark for the ERER. This information would assist them to reasonably set the exchange rate
for future economic purposes.