Marial A. Yol
Department of Economics, University of Juba, Sudan & Department of Economics, Universiti Putra Malaysia, Malaysia.
Abstract
The objective of this paper is to estimate the extent of exchange rate misalignment in the Sudan over period 1970-2005. The bounds test finds two cointegrating relations when nominal and world price index are the dependent variables. The long-run coefficients indicate that nominal exchange rates were jointly determined by the world and domestic prices. The significant error-correction term implies that approximately 65% of total disequilibrium in nominal exchange rate was being corrected in each year in Sudan. The evidence strongly indicates that oil perpetuated the recent dinar appreciation thought to be responsible for poor performance of traditional non-oil exports.
JEL
Classification:
F31; F41
Keywords : PPP hypothesis; Bounds Test; Exchange Rate Misalignment; Dutch Disease; Sudan