Impact Of Fiscal Policy Shocks On Official Versus Parallel Exchange Rate Of Sudan: Under Long-Term Economic Sanction And South Sudan Reverondum (1997-2017)
DOI:
https://doi.org/10.18034/ra.v6i1.327Keywords:
fiscal policy shocks, official versus parallel exchange rate, IRFsAbstract
We analyze the impact of fiscal policy shocks on official and parallel exchange rates in Sudan under two extreme circumstances over the period1997-2017, using standard structural VAR framework, supported by Impulse Response Function IRFs to investigate the performance and transitory shocks on exchange rate systems, at first the stationary of the variables is obtained to avoid the specious of the model. The result of long run analysis shows that lag fiscal policy expressed by LGt; lag official exchange rate (Loexrt) and lag economic openness( Leopent) have significant positive impact on parallel exchange rate , on the other hand lag Gross Domestic Product(LGDPt) and LGt variables shows significant impact on official exchange rate, with respect to IRFs, the shock of fiscal policy on Loext only significant in the short run; while in the long run it deserve no effect, hence South Sudan referendum shows negative impact on LGt, which mean that Sudanese government fiscal policies did not achieved the targeted objectives, concerning US economic sanction results indicates that it is one of the main factors of parallel exchange rate volatility and encouragement of black market of foreign currencies. The study recommend the important of a comprehensive packages of fiscal and monetary policies; unification of multi-exchange rate system; rationalize taxes and duties to combat smuggling and the need to increase exports and encouraging inflow of remittances of Sudanese working abroad.
Downloads
References
Ahmed Badawi,(2002)"Private Capital Formation and Macroeconomic Policies in Sudan: Application of Simple Co-integration Vector Autoregressive Model " University of Khartoum Press,p.o.Box11115.
-Antonio.A&Ricardo M(2009)"The Macroeconomic Effects of Fiscal Policy" European Central Bank, working paper No.991.
-Aron, J. and Elbadawi, I. (1992) “Parallel Markets, the Foreign Exchange Auction, and Exchange Rate Unification in Zambia”, Policy Research Working Papers, No.909, World Bank, Washington, D.C. USA.
-Benjamin,Falka&Muller(2012)," Exchange Rate and Fiscal Multipliers" CEPR and info.institute,F41,E62.
-David P&Shang-Jin(2014) "Fiscal Policy and Real Exchange Rate " financial markets research centre at Vanderbilt university, jel f32
-Ebaidalla.Ebaidalla(2017)"Parallel Exchange Market for foreign Exchange in Sudan :Determinants and Impact on Macroeconomic Performance,ERF23rd, Amman, Jordon.
-Ebaidalla.M Ebaidalla.(2013)"Impact of Exchange Rate Volatility on Macroeconomic Performance in Sudan"
-Elbadawi, I. (1992), “Macroeconomic Management and the Black Market for Foreign Exchange in Sudan”, Policy Research Working Paper, No. 859. World Bank, Washington, D.C. USA.
-Faik K&W.Doglas(2006) "Fiscal Shocks, the Trade Balance, and the Exchange Rate" Mcmillin,eokora@Isu.edu
-Gilbert.D &Daniel C (2017) " Exchange Rate Fluctuation, Stock Market Performance and Economic Growth in Nigeria Under Democratic Dispersion" International Journal of Innovation Research and Advanced Studies(IJRAS),vol.4,issue.1
-Hassan Darabi(2014) " Economic Fluctuation and its Effects on Tourism in Kish Island, Iran" journal of tourism,ISSN,vol.2.
https://www.researchgate./publication
-IMF, Group Report(2013)" Monetary Transition Mechanism in Sudan" IMF, Washington DC.
-Jeffery S&Charles w(1984) "Real Exchange Rate Effect of Fiscal Policy" National Bureau of Economic Research,Cambridge,MA02138
-Kalid H.Siddig(2011) " The Controversy of Exchange Rate Devaluation in Sudan: An Economy-Wide General Equilibrium Assessment " Agricultural economics, Working paper series, Khartoum University,No2.
-Kiguel. A. and O’Connel, S. (1994), “Parallel Exchange Rates in Developing Countries: Lessons From Eight Case Studies”, Policy Research Working Papers, No. 1265. World Bank, Washington, D.C. USA.
-Koti Reddy&Agraharic(2012), "Impact of Fiscal Stimulus on Stock Market and Economy " Economic and Business Journal,vol.4,No.1
-Maddala,G.S.(1992).Introduction to Econometrics .Macmillan Publishing Company, New York, 2nd Ed.
-Mahran&Gangi(1996),"Causes of Inflation in the Sudan(1970-1991)" Eastern Africa Social Science Research Review(EASSRR)Vol.xii,no.2
-Manyok A John(2016) "Effect of Exchange Rate Fluctuation On Financial Performance of Commercial banks in South Sudan " unpublished research project, university of Nairobi
-Mohammed,L&Sulaiman.D(2010),"The Sources of Real Exchange Rate in Pakistan " European Journal of Social Science.vol.14
-Nowak, M. (1984), “Quantitative Controls and Unofficial Market in Foreign Exchange, A Theoretical Framework”, IMF Staff Papers, Vol. 31, No. 2, pp. 404-431.
-Richard C&Joe P(1999)"Fiscal Policy and Real Exchange :some empirical estimates " National Bureau of Economic Research,Cambridge,MA02138
-Suliman,Z.Abdalla(2016)"Modeling the Sources and Impact of Macroeconomic Fluctuation in Sudan" Institute of Development Economic, Japan
-Taghi N.&Zomini(2015) " The Impact of Monetary and Fiscal Policies on Iran,n Stock Market" An SVAR Approach,Journal of Applied Environmental and Biological Sciences, www.textroad.com
-Trust.R(2016) "The Determinants of Exchange Rate Volatility in South Africa" Eras' Economic Research, South Africa, working paper.604
--0--
Downloads
Published
Issue
Section
License
ABC Research Alert is an Open Access journal. Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal the right of first publication with the work simultaneously licensed under a CC BY-NC 4.0 International License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of their work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal. We require authors to inform us of any instances of re-publication.
