Exchange rate policies in Arab countries: Assessment and recommendation

While being an important relative price in the economy, the exchange rate itself is just one technical element in a broader monetary and exchange rate operational framework. Consequently, the approach adopted in evaluating the exchange arrangements must be integrative in nature. As it follows, and in the context of Arab economies, issues related to (a) maintaining internal and external stability (in terms of demand management policies and exchange rate corrections to preserve the viability of the balance of payments). (b) introducing natural productivity-enhancing reform policies aimed at boosting growth (via a more liberalized trade system, a stimulative environment to foreign investment, timely privatisation plans, or strategies aimed at diversifying the production base of the economy to reduce dependence on key commodities, (c)observing an internally consistent mix of monetary and exchange rate policies and operations in light of a globally integrated financial system, and (d) stressing the differences in factor endowments, in economic structures and financial system.