Fluctuations In The Real Exchange Rate Under The Trade Liberalization (Egypt Case Study For The Period 1984-2006)

Abstract

The research focuses on the study of the movements of actual exchange rates (nominal and real) under the trade liberation ,it comes in two directions, first description of the behavior of these movements before and after trade liberalization, and the other is a statistical comparison between the period of liberalization and the period that precedes. The economic theory assumes that the behavior of nominal and real exchange rates tend to decline significantly after the countries liberate its trade compared to its behavior before the liberation. The research concluded that the behavior of the nominal effective exchange rate in Egypt has achieved rise over the period of intensive trade restrictions (1984-1997), but the behavior after the liberalization of trade in 1997 began to change as it has decreased gradually, which is in line with the logic of the economic theory. While the real effective exchange rate in Egypt has risen over the selected period (1984-2006) where its value characterized by substantial increase due to the excessive high rates of inflation in Egypt in comparison to its trade partners.