To Smooth or Not to Smooth—The Impact of Grants and Remittances on the Equilibrium Real Exchange Rate in Jordan

November 1, 2006

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Format: Chicago

Martin Petri, and Tahsin Saadi Sedik. To Smooth or Not to Smooth—The Impact of Grants and Remittances on the Equilibrium Real Exchange Rate in Jordan, (USA: International Monetary Fund, 2006) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper estimates the effect of grants and workers' remittances on Jordan's long-term equilibrium real exchange rate. We estimate an equilibrium path for the Jordanian real exchange rate using the Johansen cointegration methodology over the period 1964 to 2005. Controlling for other fundamentals, we find that both grants and workers' remittances appreciate the equilibrium real exchange rate in a statistically and economically significant way. We also find that assessing deviations of the actual real exchange rate from the estimated equilibrium real exchange rate is nontrivial because different smoothing methodologies and the nonsmoothed estimates give very different results.

Subject: Exchange rates, Outward remittances, Real effective exchange rates, Real exchange rates, Terms of trade

Keywords: Dinar, ERER, Exchange rate, Jordan, Jordanian dinar, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/257
Stock No:

WPIEA2006257
ISBN:

9781451865172
ISSN:

1018-5941

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